China to Close Loophole Used by Tech Firms for Foreign IPOs
- Existing VIEs will have to improve transparency, people say
- Hong Kong listings exempt from ban but still need approval
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China is planning to ban companies from going public on foreign stock markets through variable interest entities, according to people familiar with the matter, closing a loophole long used by the country’s technology industry to raise capital from overseas investors.
The ban, intended in part to address concerns over data security, is among changes included in a new draft of China’s overseas listing rules that may be finalized as soon as this month, said the people, asking not to be identified discussing private information. Companies using the so-called VIE structure would still be allowed to pursue initial public offerings in Hong Kong, subject to regulatory approval, the people said.