Hello-bike, an Ant Group-Backed, Chinese rideshare company that operates in over 400 cities has filed a request for withdrawal of registration with the SEC after big plans for a $1 billion IPO. The request follows the cybersecurity review into Chinese ride-hailing company, Didi Global Inc. and the regulatory crackdown on US-listed Chinese companies by the US Securities and Exchange Commission.
The rideshare service which offers predominantly bikes, but also offers electric bikes and ride-hailing services, launched in 2016 and had 400 million users in October of 2020. This was a 100 million user increase from the year 2019. The company has stated that it no longer wishes to pursue a public offering on the US Stock Market and wrote in their request for withdrawal,
“The Company is seeking withdrawal of the Registration Statement because it no longer wishes to conduct a public offering of securities at this time. The Registration Statement has not been declared effective by the Commission and no securities have been issued or sold under the Registration Statement. Based on the foregoing, the Company submits that the withdrawal of the Registration Statement is consistent with the public interest and the protection of investors, as contemplated by Rule 477(a).”
Requirements for Chinese Companies to List in the US Exchange
According to the SEC, Chinese companies listed on US exchanges must disclose any risks related to the Chinese government interfering in their business as part of their regular reporting obligation. Many Chinese IPOs in the US are currently paused as guidance from the SEC is awaited.
This uncertainty in foreign regulation and how it affects the trade of stock may deter some investors and point them toward smaller domestic corporations which come with their own associated benefits. One of these is the federal tax exemption for qualified small business stock (QSBS). If domestic businesses meet the criteria outlined in Section 1202, their stock can be sold with up to a 100% capital gains tax exemption, meaning maximum profit for investors.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.