Shares of iQiyi (NASDAQ: IQ) fell today as investors reacted to news that the U.S. Securities and Exchange Commission (SEC) may potentially delist Chinese stocks that don’t adhere to U.S. accounting standards. Investors are also concerned about the increasing regulation of Chinese tech companies by the Chinese government.
The tech stock was down by 13.3% at the end of the trading day.
The SEC issued a statement earlier this week about the Holding Foreign Companies Accountable (HFCA) Act, which was set up under the Trump administration. The HFCA act says that any foreign companies that don’t comply with U.S. auditing standards for three years could be delisted from U.S. stock exchanges.
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The HFCA Act is primarily aimed at China, and also has rules requiring companies to report if their board members are in the Communist Party.
Investors are concerned that some technology companies based in China could potentially be kicked off of U.S. exchanges, and are now selling their shares.
Additionally, investors are worried about increasing oversight of China-based tech companies from the Chinese government.
The Chinese government said earlier this week that it may set up a joint venture between itself and Chinese tech companies to oversee the data used by millions of users.
iQiyi investors should expect some additional share price swings from the company’s stock, as well as other Chinese stocks. With the SEC pursuing the use of the HFCA Act and the Chinese government becoming more involved in Chinese tech companies, it’s likely that some investors will leave Chinese tech stocks until these tensions ease.
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Chris Neiger has no position in any of the stocks mentioned. The Fintech Zoom recommends iQiyi. The Fintech Zoom has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.