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Highlights
- Warren Buffet-backed BYD shelved its plans of getting its semiconductor unit listed on the Chinese exchange.
- The setback came about following a regulatory investigation launched by China Securities Regulatory Commission.
- The Chinese regulator launched a probe into Tian Yuan Law Firm, the law firm advising the company on the deal.
Chinese battery and carmaker BYD, backed by Warren Buffet, the American business magnate, has shelved its plans of getting its semiconductor unit publicly listed on the exchange following a regulatory investigation launched by the China Securities Regulatory Commission.
Shenzhen Stock Exchange announced suspending review of BYD Co’s application for share sale after the Chinese regulator launched a probe into Tian Yuan Law Firm, the firm advising the company on the deal.
BYD’s plans
Applications made by 14 other firms for getting listed on ChiNext board have also been shelved as the same law firm was advising them as well. Shenzhen Stock Exchange since 18 August, it stopped handling IPO applications.
BYD’s board had approved turning BYD Semiconductor Co into a separate entity in May, and the IPO application was accepted for review in June. BYD’s shares have picked up recently after it announced its decision to spin-off the chip division.
The ChiNext exchange is an index for tech-based companies like Nasdaq. It had approved the IPO application for evaluation in June. According to the prospectus of BYD, which is China’s biggest automotive chips maker, it had plans of raising 2.68 billion yuan (~US$ 412 million) from its public listing.
Chinese crackdown
The suspension of IPO plans for BYD Semiconductor and the 14 other companies is at the backdrop of heightened regulatory scrutiny launched on China’s technology-enabled businesses. The government scrutiny on these companies is on a host of allegations, ranging from data usage, kind of advisers being hired, cybersecurity issues, and antitrust. The Chinese government has said it aims to make the quality of the market better through these measures. But these policies are hurting the prospects of these companies and shelving their IPO plans.
Behemoths like Didi Global Inc, Tencent Holdings Ltd, and Alibaba Group Holding have been at the centre of the attack launched by the Chinese authorities to curb monopolistic tendencies.
Experts, though, believe that the setback to BYD’s listing plan is temporary, and it would get resolved once a new law firm is appointed. They believe that investors are confident that the separation plan would eventually take off.
Conclusion
BYD Semiconductor is a major global player in the industry. Its direct competition includes Japanese company Rohm Semiconductor and German company Infineon. Its debut was being closely watched as it could have catapulted BYD into one of the top Chinese companies. But as its listing has hit a roadblock, investors and other global players would have to wait and watch by when things pick up the pace again.
