A dozen U.S.-listed Chinese firms including gaming operator Melco Resorts & Entertainment and Studio City International have been added to a Securities and Exchange Commission (SEC) list of companies that may be removed from American stock exchanges.
According to Macau Business, the delisting risk is due to the U.S. Holding Foreign Companies Accountable Act (HFCAA), which requires that listed companies be audited by firms subject to inspection by the U.S. Public Companies Accounting Oversight Board (PCAOB).
Companies that don’t comply face expulsion from American stock exchanges after three consecutive years of non-compliance, so the earliest a company could be delisted would be in 2024.
In a statement issued, Melco Resorts said it expected the red flag, as its auditor, Ernst & Young Hong Kong, is based in a jurisdiction that cannot be fully inspected by the PCAOB. Melco Resorts’ parent, Melco International Development Ltd., holds a separate listing via its Hong Kong Stock Exchange (HKSE).
“Melco will continue to closely monitor developments and explore options in relation to the HFCAA,” stated the gaming operator, which is listed on NASDAQ. Studio City International Holdings Ltd. (SCIHL), which is controlled by Melco, runs the Studio City resort brand.
The list also includes Microvast Holdings, China Automotive Systems, Daqo New Energy, Connect Biopharma Holdings, OneConnect Financial Technology, Green Vision Biotechnology, Legend Biotech, Logiq and Noah Holdings.
Companies flagged by the SEC can dispute their placement on the list under a “rebuttable presumption” clause in the U.S. legislation. In a previous note on the issue, Bernstein analysts said minus a resolution, Melco Resorts could be to do a listing on the Hong Kong Stock Exchange (HKSE) or potentially merge with Melco International Development.
