Recent scrutiny surrounding Chinese ride-hailing company Didi could signal an inevitable delisting of Chinese companies on U.S. exchanges, according to Cowen. Chinese regulators announced a cybersecurity review of Didi just days after its public debut last week. The Chinese cabinet also said Tuesday that it would step up oversight of domestic firms listed overseas. But Cowen believes China's crackdown on its U.S.-listed companies is not enough to convince American lawmakers to repeal oversight requirements passed last year. "China's response to the DiDi Global IPO is reinforcing our view that the Chinese government will not give U.S. market regulators the power to inspect the audits of Chinese companies listed on U.S. exchanges," Cowen's Jaret Seiberg said. The Senate in 2020 passed a bill that would delist foreign companies that refuse to give U.S. regulators access to their audits after three years. The move came soon after Chinese-based coffee chain Luckin Coffee , once thought to be a promising Starbucks rival, revealed its chief operating officer fabricated 2019 sales by the equivalent of more than $300 million. With recent developments related to Didi, Seiberg said "China's decision to frame audit access as a national security threat means China will not back down." "To us, that means delisting of Chinese companies appears inevitable," Seiberg added. At best, according to Cowen, the move by Chinese regulators to enact stricter supervision of domestic companies could push back the delisting requirement. However, the firm believes "lack of goodwill on both sides" will keep the three-year deadline in place. Meanwhile, Bloomberg News reported on Wednesday that Chinese regulators are considering a rule change that would allow them to block a domestic company from listing in the U.S., citing people familiar with the matter. — CNBC's Tom Franck and Michael Bloom contributed reporting.
A mobile phone shows the interface of Didi's APP in Yichang, Hubei province, China, July 4, 2021.
Costfoto | Barcroft Media | Getty Images
Recent scrutiny surrounding Chinese ride-hailing company Didi could signal an inevitable delisting of Chinese companies on U.S. exchanges, according to Cowen.