NASDAQ Calls for Scrutiny of Small Firm Ipos Share Allocations after Bizarre Price Swings

    Recently, many small-cap companies with Initial Public offerings posted more than 2000 % gains. What raised eyebrows was that most of them were Chinese firms, and almost all were underwritten by one Broking Company in Manhattan.

    Bloomberg news reported this bizarre IPO debut early this month. Now Nasdaq Inc. is asking for details about share allocations in initial public offerings by small-cap companies. The idea is to scrutinize what is seen as substantial price swings, and not surprisingly, most of them are trading at a huge discount after the first-day debut peak.

    A   Stevenson Wong & Co, a law firm based in Hong Kong, disclosed that Nasdaq has been scrutinizing applicants for IPOs. Partner Gordon Tsang said that in the past few weeks, Nasdaq had asked many applicants to provide information, including names, bank accounts, and other details of individuals allotted shares in the IPO process.

    Nasdaq is also looking into the details of share allocations, such as quantity allocated and which brokerage firms are involved in the recent IPOs that hit Wall Street. The list includes Top financial group and Magic Empire Global ltd. IPOs.

    Share Price Swings  

    This year more than a dozen small-cap companies debuted on the US stock market. The outsized price fluctuations led to Nasdaq looking more closely and centered around new IPOs. This development adds to uncertainty on the timing of new IPOs, including Lichen China Ltd, Hongi Group Inc., and Alopexx Inc., a US-based company.

    Nasdaq’s fresh requests aim to bring more transparency to share placement and connected transactions linked to the IPOs. This looks similar to regulators in Hong Kong stock exchanges which had asked for details a few years ago.

    Tsang is optimistic that IPO deals will eventually get subscribed and list successfully.

    A representative of Nasdaq declined to comment on the development.

    In the US, the gap is shorter between the IPO pricing and first-day listing and trading compared to Hong Kong, which sees a typical 5-day lag. In the US, underwriters are usually asked to submit share allocation details, partly due to the limited time to review them.

    In 2017, regulators in Hong Kong stopped some IPOs as there were concerns about some irregularity in share allocations of small-sized companies. The fear was that such a listing could result in skewness and jeopardize an orderly market debut listing.


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