The Senate passed a bill earlier this month that would require companies to prove they are not controlled by a foreign government and that they can meet U.S accounting standards, threatening some of Beijing’s largest listings in the United States. Some exchanges are already cracking down like the NASDAQ planning to delist Luckin Coffee Inc. after it allegedly fabricated transactions.
I think we have to separate a few of the very vital questions here. First and foremost, for a non-US company from China or whatever part of the world, to be introduced into the American markets and particularly to be listed on the premier exchange of the New York Stock Exchange, they must meet U.S accounting gap standards.
If they don’t or if they do and then fail to continue to meet those standards quite rightly, we should throw them off the exchange.
So I applaud the action of the Congress, but before a company is admitted to U.S markets, whether it’s the NYSE or NASDAQ, they must meet the U.S generally accepted accounting principles.
Now, if they don’t, then you simply deny access. If you look at the Luckin situation, Luckin was a fraud no worse or no different than WorldCom or some of the other frauds we’ve seen in the United States. Quite justifiably, you take the company like that, and you throw it off the exchange.
You deny access to the world’s deepest capital market, the broadest base of investors. That’s why companies come here seeking access to a broad base of investors. They sought the opportunity to do strategic partnering with U.S companies, and all of those attributes are still and perhaps even more so present today.
So there is a magnetism to coming to the United States, but there is also a cost. U.S investors must be protected, and that’s what the Congress is dealing with.
Perhaps this situation will affect a significant piece of business, but I think more so would be if they did not take the necessary actions.
The loss of investor confidence, the loss of U.S. participation in our markets is far greater, so I think it’s important that American investors trust NASDAQ and NYSE to do the right thing here. Even though in the short term, it may cost them some business, in the long term, it enhances the brands of those two great markets and will enjoy the continued participation of worldwide investors.