Nasdaq has put the brakes on initial public offering (IPO) preparations of at least four small Chinese companies while it investigates short-lived stock rallies of such firms following their debuts, according to lawyers and bankers who work on such stock launches, reports Reuters.
The stock exchange operator’s actions come amid a surge in the shares of Chinese companies that raise small amounts, typically $50 million or less, in their IPO. These stocks rise as much as 2,000% in their debuts, only to nosedive in the days that follow, bruising investors who are bold enough to speculate on penny stocks.
Douglas Ellenoff, a corporate and securities attorney at Ellenoff Grossman & Schole LLP, said he was informed by the Nasdaq that certain IPOs will not be allowed to proceed “until they determined what has been the aberrational trading activity in certain Chinese issuers earlier this year.”
