US Regulator Warns Against Chinese ‘Pump-And-Dump’ IPOs


Regulators have warned US investors to remain cautious about a wave of small initial public offerings (IPOs) that have been accused of being pump-and-dump schemes.

Many of the IPOs were from China, they said, and some stocks had risen as much as 2,000% in recent debuts after raising small amounts, only to nosedive in the days that followed.

Most of these IPOs raise less than $25 million for companies worth less than $100 million, regulators at the US Financial Industry Regulatory Authority (FINRA) warned on Thursday.


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The regulator said IPOs involving Chinese companies limit supply and artificially drive up share prices by allocating up to 90% of their offering to foreign broker dealers, primarily based in Hong Kong.

Criminals also try to entice people to invest in these IPOs through texting or social media. Sometimes they send a seemingly misdirected message, leading to a relationship that convinces victims to place orders around IPOs at a specific time and price, FINRA said.

Nasdaq and the New York Stock Exchange said separately on Thursday they would look more closely at small-cap IPOs.

“You’re dealing with market manipulations, small companies, small float, so they got to figure out what happened,” said Drew Bernstein, co-chairman of Marcum Bernstein & Pinchuk, a China-focused accounting firm.

Nasdaq had in October put the brakes on IPO preparations of several small Chinese companies, as it investigated short-lived stock rallies of such firms following their debuts.


  • Reuters, with additional editing by Vishakha Saxena



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Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has been working as a digital journalist since 2013, and is an experienced writer and multimedia producer. As an eager stock market trader and investor, she is keenly interested in economy, emerging markets and the intersections of finance and society. You can tweet to her @saxenavishakha

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