Nasdaq Stock Market, the second largest stock exchange in the world after the New York Stock Exchange, has reportedly stopped IPO listings of small-cap Chinese companies, according to a Wall Street Journal report.
The exchange is holding up approval letters and demanding more information about related parties in deals, after the share prices of several companies rose dramatically before falling in IPOs this year.
Shares of nearly 20 recently listed companies have risen over 100 percent on their first day of trading.
Nasdaq investigating
The bourse is also asking for details of investors that have been allocated shares in an IPO.
Small-cap IPOs often get heavy demand from individual investors.
More than 30 companies, most of which are from China, have filed for US IPOs that would raise less than $40m each.
In the recent past, these stocks rise as much as 2,000% in their debuts, only to fall in the days that follow, hurting investors who speculated because of the early rise.
Hong Kong-based AMTD Digital is one of the companies that triggered this move by Nasdaq.
It was listed at $13 per share in mid-July, and on August 2, it surged to $2,555.30. On Friday, the stock was down at $27.35.
Chinese garment maker Addentax Group rose more than 130-times on its market debut in August to $656.54, but is now trading at $2.37.
The Wall Street Journal added that although companies across the board faced this increased scrutiny, the exchange has been paying particular attention to companies from China and the rest of Asia.
The Journal quoted Douglas S Ellenoff, a partner in the law firm Ellenoff Grossman & Schole as saying that this was because the IPO price swings in recent months involved companies from Asia.
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