The Securities and Exchange Commission (SEC) on Wednesday added Chinese social media giant Weibo Corp. to its list of companies not in compliance with the Holding Foreign Companies Accountable Act (HFCAA).
Under the HFCAA, China-based public companies face delisting from U.S. stock exchanges if they do not allow their audits to be inspected by the Public Company Accounting Oversight Board (PCAOB) for three consecutive years, beginning in 2021. The earliest a company could be delisted would be 2024.
Weibo is the sixth China-based company the SEC has identified as being in noncompliance with the HFCAA. On March 8, the agency flagged restaurant operator Yum China Holdings, biotech firms BeiGene and Zai Lab, semiconductor process equipment manufacturer ACM Research, and pharmaceutical company HUTCHMED.
The SEC previously estimated as many as 273 companies could be identified under the law based on a review of registrants in calendar year 2020.
Weibo operates microblogging website Sina Weibo, which is often regarded as the Twitter of China. The platform has approximately 573 million monthly active users as of the third quarter of 2021, according to market and consumer database Statista.
Weibo’s stock is listed on the Nasdaq.
On Thursday, Weibo issued a statement acknowledging its HFCAA designation. “The company will continue to monitor market developments and evaluate all strategic options,” Weibo said.
The PCAOB has been engaged in talks with authorities in the People’s Republic of China (PRC) regarding audit access but said speculation about a final agreement between the two sides is “premature.”
“We continue to meet and engage with PRC authorities in an effort to achieve a cooperative agreement that provides the PCAOB with the access required to inspect and investigate completely auditors headquartered in mainland China and Hong Kong,” the PCAOB explained in an emailed statement. “We appreciate the engagement of the Chinese Securities Regulatory Commission and Ministry of Finance to work through several important threshold issues, though it remains unclear whether the PRC government, as a whole, will agree to permit and facilitate the access we require.”
Editor’s note: This story was updated March 25 to add Weibo’s statement in response to its HFCAA designation.
Kyle Brasseur is Editor in Chief of Compliance Week. His background includes expertise in user personalization with ESPN.com.
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