Robinhood drops 12% in volatile public-trading debut after IPO valuing it at $32 billion

Vlad Tenev, CEO and Co-Founder, Robinhood in his office on July 15, 2021 in Menlo Park, California.
Vlad Tenev, CEO and co-founder, Robinhood.

  • Robinhood whipsawed in its trading debut on Thursday, with shares initially jumping 6% before falling as much as 12%.
  • The online trading app was valued at $32 billion when it priced its IPO at $38 per share on Wednesday.
  • Robinhood raised $2.1 billion from its IPO and allocated a portion of shares to its user base.
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Online trading app Robinhood whipsawed in its post-IPO debut on Thursday, with shares climbing 6% before falling as much as 12%. Shares hit a high of $40.22 before falling to a low of $33.60.

The company priced its IPO late Wednesday night at $38 per share, representing the bottom end of its targeted range of $38 to $42 per share. The IPO raised $2.1 billion for the company and gave it a valuation of $32 billion.

Robinhood last raised $3.4 billion earlier this year, with shares trading on private secondary markets at a valuation around $40 billion. The company raised the money amid a surge in retail trading in meme-stocks like GameStop and AMC Entertainment.

The company has seen explosive growth amid the COVID-19 pandemic and government stimulus checks, with millions of Americans becoming first time investors in the stock market. Robinhood has more than 18 million accounts and 17.7 million active monthly users.

While the brokerage firm is not yet profitable, the company saw revenue grow 245% to nearly $1 billion in 2020. That revenue growth accelerated in the first quarter of 2021, surging 309% to $522 million, according to its S-1 filed with the SEC last month.

Much of that growth is coming from options and crypto trading, two highly speculative areas of markets than often lead to either big losses or massive fortunes.

Unique to Robinhood’s IPO is the company’s decision to allocate up to 35% of its IPO shares to users of its app. Retail investors are often restricted from investing in IPOs at the pricing afforded to institutional investors.

While Robinhood’s IPO represents a big milestone for the company, there is still a long way to go before co-founders Vlad Tenev and Baiju Bhatt can cash in on their hefty compensation awards. Both founders will be awarded $1.4 billion if Robinhood’s stock price reaches $101.50 by 2025.

Robinhood trades on the Nasdaq under the symbol “HOOD.”

Read more: Top 16 meme stocks this week on Reddit: Tesla tops the charts after record earnings while Chinese stocks get smacked amid brutal regulatory crackdown

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Robinhood prices IPO at $38 per share, valuing the online brokerage app at $32 billion

Robinhood on cellphone
  • Robinhood priced its IPO at $38 per share on Wednesday, valuing the company at about $32 billion.
  • The online brokerage app revealed surging growth in its S-1 filing amid the COVID-19 pandemic and government stimulus checks.
  • Robinhood is set to trade on the Nasdaq under the symbol “HOOD” on Thursday.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Robinhood priced its IPO at $38 on Wednesday, valuing the online brokerage app popular with retail investors at roughly $32 billion. The Wall Street Journal first reported the pricing.

Robinhood’s IPO pricing came it at the bottom end of the price range it had initially been targeting during its roadshow of $38 to $42 per share. Robinhood last raised $3.4 billion earlier this year, with shares trading on private secondary markets at a valuation around $40 billion.

The company has seen explosive growth amid the COVID-19 pandemic and government stimulus checks, with millions of Americans becoming first time investors in the stock market. Robinhood has more than 18 million accounts and 17.7 million active monthly users.

While the brokerage firm is not yet profitable, the company saw revenue grow 245% to nearly $1 billion in 2020. That revenue growth accelerated in the first quarter of 2021, surging 309% to $522 million, according to its S-1 filed with the SEC last month.

Much of that growth is coming from options and crypto trading, two highly speculative areas of markets than often lead to either big losses or massive fortunes.

Unique to Robinhood’s IPO is the company’s decision to allocate up to 35% of its IPO shares to users of its app. Retail investors are often restricted from investing in IPOs at the pricing afforded to institutional investors.

While Robinhood’s IPO represents a big milestone for the company, there is still a long way to go before co-founders Vlad Tenev and Baiju Bhatt can cash in on their hefty compensation awards. Both founders will be awarded $1.4 billion if Robinhood’s stock price reaches $101.50 by 2025.

Robinhood is set to trade on the Nasdaq under the symbol “HOOD” beginning on Thursday.

Read more: Top 16 meme stocks this week on Reddit: Tesla tops the charts after record earnings while Chinese stocks get smacked amid brutal regulatory crackdown

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Robinhood CEO says the company is all-in on crypto and that users can expect new crypto features at ‘some point’

Baiju Bhatt_Vlad Tenev_Co Founders and Co CEOs
Baiju Bhatt and Vlad Tenev cofounders and CEOs of Robinhood

  • Robinhood CEO Vlad Tenev says the company is focused on expanding its crypto offerings.
  • He said users can expect a crypto wallet at “some point.”
  • It’s a glimpse at the company’s future ahead of it’s highly anticipated IPO.
  • See more stories on Insider’s business page.

Robinhood CEO Vlad Tenev announced Saturday that crypto is a lynchpin of the retail investment app’s future, and a wallet could be in the works.

“We’ve been doing a lot of work behind the scenes to provide our crypto customers with the functionality that they’ve been asking for,” he said. “We know you want wallets.”

Users can expect a beta release of new crypto features at “some point,” he said, but did not provide any further timeline. It’s a more tentative proclamation than he’s previously made. Back in March, Tenev promised users a crypto wallet “as fast as possible.”

Robinhood users currently can’t transfer crypto assets in and out of their account, potentially driving some customers to platforms like Coinbase. However, Tenev said that will be fixed as well.

“We want to introduce new features safely,” he said. “And there’s a lot of items we have to get right from the start.”

Tenev’s statements came during Robinhood’s public roadshow Saturday, where the company’s top executives fielded questions from the public about its upcoming IPO, planned for Thursday.

It’s been clear for awhile that Robinhood, founded in 2013, was veering into the crypto world. In the company’s S-1, it revealed that 17% of its first quarter revenue came from cryptocurrency transactions.

But the company has admitted that crypto trading might be a liability. Dogecoin made up 34% of Robinhood’s first quarter crypto-trading revenue, according to its IPO filing. If interest in the meme coin declines, the company said it could be a risk to the business.

Especially in light of the many, many headlines about the company, Robinhood’s IPO is highly anticipated. In its regulatory filing, the company said it’s aiming to raise as much as $2.3 billion, with a market valuation at $35 billion at the top range. In line with company’s mission to “democratize finance,” it will offer a third of its shares directly to customers through its app.

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Robinhood promises to fix ‘the issues’ that outraged customers when it restricted trading in meme stocks

Robinhood logo stocks investing
  • Robinhood CEO Vlad Tenev acknowledged the company angered many customers after it blocked them from trading GameStop and other red-hot stocks.
  • On Saturday, Tenev promised to learn from past mistakes and “ensure they never happen again.”
  • Saturday’s roadshow event comes just days ahead of the commission-free trading app’s hotly anticipated IPO.
  • See more stories on Insider’s business page.

Robinhood knows it angered many retail investors earlier this year when the trading app halted buying of GameStop, AMC, and other meme stocks amid an epic rally – and the company has pledged to earn back the trust of frustrated customers.

In a roadshow event Saturday ahead of its planned initial public offering, Robinhood cofounder and CEO Vlad Tenev said the company is “focusing on is making sure we fix the issues that led to customers being upset.”

The app’s growth has been “amazing,” he said, but “it has led to some real challenges.”

“We’re committed to learn from these experiences and help ensure they never happen again,” he said.

Robinhood drew customers’ ire when it halted the buying of GameStop and other meme stocks during a Reddit-fueled frenzy in January, only allowing users to sell. Outraged traders flooded the app with one-star reviews on Google, lowering its user rating. Many said they would stop using the app in protest, and Redditors on the investing thread Wall Street Bets called for legal action.

Despite the blowback and ensuing regulatory scrutiny, Robinhood, which was launched in 2013 with the mission to “democratize finance for all,” saw a huge jump in new users in the first quarter, according to its S-1 filing. Monthly active users jumped by 6 million in the first three months of 2021 to 17.7 million from 11.7 million at the end of December, an increase of 51%.

The company on Saturday also outlined its plans to continue to grow revenue if US regulators ban payment for order flow, at the heart of its business model. Payment for order flow, or PFOF, is the practice of a brokerage receiving payment from a market maker to send customers’ shares to it. PFOF has drawn criticism from investor advocates who say it encourages brokerages to maximize their revenue at the expense of customers.

The company’s chief financial officer, Jason Warnick, defended PFOF as “a better deal for our customers versus the old commission structure.”

“That said, as we continue to add products and features to our platform we anticipate we will expand the sources of revenues we generate for the company,” he added.

Robinhood said it plans to expand its securities lending business, invest more into Robinhood Gold, its subscription service, and expand internationally. It also said it’s all-in on crypto.

Robinhood’s IPO, planned for Thursday, is among the most highly anticipated of the year. The company will be offering a third of its shares directly to customers through its app, a far greater amount than is usually offered to individual investors during most IPOs. Its livestreamed roadshow was also unique — open to retail investors in what is an event usually reserved for institutional investors.

The Menlo Park, California-based firm in its regulatory filing said it is aiming to raise as much as $2.3 billion in its IPO. It is offering 55 million shares priced at $38-$42, putting its market valuation at $35 billion at the top range.

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Didi has fallen a stunning 52% since its US IPO as China’s crackdown pummels the ride-hail giant

FILE PHOTO: The logo of Didi Chuxing is seen at a Didi station in Beijing, China January 2, 2019. REUTERS/Jason Lee
FILE PHOTO: The logo of Didi Chuxing is seen at a Didi station in Beijing

  • Didi is vying for China’s worst US IPO this year as its stock has lost more than half its value.
  • Not long ago, Didi was eyeing a $70 billion valuation. Less than a month from its debut, it is now worth less than $40 billion.
  • Didi has been spared the title of worst IPO this year by RLX Technology, a vaping company that has fallen 78%.
  • See more stories on Insider’s business page.

Didi is vying for China’s worst US IPO this year as the besieged ride hailing company’s stock has lost more than half its value.

Compared to the market open price on the day of its IPO, Didi has crashed as much as 52.1% on Friday. The company’s IPO listing price was $14, but the stock opened at $16.65 on its first day of trading. It now sits around $8, having fallen 31% this week alone.

Not long ago, Didi was eyeing a $70 billion valuation. Less than a month from its debut, it is now worth less than $40 billion.

That was the second-worst US listing for a Chinese company so far this year, of which there have been 37, according to Bloomberg. Didi edged out Full Truck Alliance, the so-called Uber for trucks that went public a week before Didi, which has lost 50.5% since its market open.

Both companies have been casualties of China’s rapidly enveloping cybersecurity probe. They have been barred from registering new users as the cyber ministry digs into alleged data-privacy risks for Chinese users.

Still, Didi has been spared the title of worst IPO this year by RLX Technology, a vaping company that has been buffeted by planned regulations to rein in China’s exploding e-cigarette usage. RLX has collapsed nearly 78% and is trading at less than $5 after debuting at $22 in February and peaking at $30.

Didi was trading at $8.04 as of 1:54 p.m. ET, down 21.2% so far on Friday.

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Tom Barrack’s SPAC withdraws its IPO filing days after the billionaire was arrested and charged with illegal lobbying

Tom Barrack, former Deputy Interior Undersecretary in the Reagan administration, delivers a speech on the fourth day of the Republican National Convention on July 21, 2016 at the Quicken Loans Arena in Cleveland, Ohio.
Thomas Barrack

  • The SPAC backed by Thomas Barrack withdrew its IPO application with the SEC on Friday.
  • The move comes days after the billionaire was arrested and charged with seven felony counts.
  • Falcon Acquisition had filed for a $250 million IPO in March with the goal of targeting tech-driven businesses.
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The blank-check company backed by billionaire Thomas Barrack withdrew its application for an initial public offering Friday, just days after the 74-year-old was arrested and charged with seven felony counts.

Falcon Acquisition, the New York based-SPAC led by Barrack, filed for a $250 million IPO in March this year with the goal of targeting tech-driven businesses. Falcon Acquisition was founded in 2020.

In a letter to the Securities and Exchange Commission dated July 23, the company only said, “it has elected to abandon the transactions subject thereto.”

On July 20, Barrack, the chairman of Donald Trump’s inaugural fund, was accused of illegally lobbying the Trump administration on behalf of the United Arab Emirates.

Barrack was charged along with Matthew Grimes and Rashid Sultan Rashid Al Malik Alshahhi.

The billionaire’s spokesperson told Insider that Barrack, founder and former executive chairman of the investment-management firm Colony Capital, would plead not guilty.

Barrack was arrested in Sylmar, California, and has been held in a federal jail in Los Angeles since then. He is scheduled to appear before a federal judge in Los Angeles on Friday.

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Banks are reportedly scrambling to move IPOs of Chinese companies from New York to Hong Kong after regulators cracked down on overseas listings

Hong Kong Skyline
  • Regulators’ harsh response to Didi’s IPO has forced the 20 or so Chinese companies that had plans to go public in New York to re-evaluate, according to a Financial Times report.
  • 34 Chinese firms raised $12.4 billion in New York capital markets in the first half of this year, according to Dealogic data.
  • Data-oriented companies have been most eager to plan for Hong Kong listings, in large part because the mainland government’s crackdown has centered around data privacy.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Investment banks are scrambling to divert Chinese IPOs away from the US market and into Hong Kong as the government’s crackdown on foreign listings spreads, according to a Financial Times report.

Regulators’ harsh response to China’s last major foreign IPO, that of Didi Chuxing, has forced the 20 or so Chinese companies that had plans to go public in New York to re-evaluate.

Bankers who spoke with the FT said clients are exploring moving listings to Hong Kong but are also wary of the hurdles. Hong Kong-specific regulatory requirements and the inherent uncertainty of going first were among the leading concerns.

“We’re speaking to everyone about it,” one Hong Kong-based investment banker told the FT. “If you want to do a deal this year, at best you’ll be delayed until 2022 and at worst you won’t be able to do it.”

The move toward Hong Kong is an abrupt shift for corporate China. 34 Chinese firms raised $12.4 billion in New York capital markets in the first half of this year, according to Dealogic data previously reported by the FT.

In the wake of Didi’s NYSE debut, China’s cybersecurity ministry alleged the company had violated privacy laws and launched an investigation into its data practices. The action took Didi’s stock price down sharply the day of the announcement.

Data-oriented companies have been most eager to plan for Hong Kong listings, in large part because the mainland government’s crackdown has centered around data privacy. Moving to Hong Kong could abate some of that scrutiny, two bankers told the FT.

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Robinhood plans to raise as much as $2.3 billion in its upcoming stock-market debut

Robinhood logo displayed on a phone screen and representation of cryptocurrencies are seen in this illustration photo taken in Krakow, Poland on June 29, 2021

Robinhood is aiming to raise as much as $2.3 billion in its upcoming stock market debut, the company said in a filing with the Securities and Exchange Commission on Monday.

The popular investing app said it’s offering 55 million shares priced at between $38 and $42 each during its roadshow. At the top end of that range, Robinhood could have a market valuation of $35 billion.

It plans to list on the Nasdaq under the ticker symbol “HOOD” and is expected to go public by the end of next week. Under its new program to “democratize” IPOs, Robinhood plans to allocate 35% of its IPO shares to retail investors, The Wall Street Journal reported.

If it hits $101.50 per share in the next four years, cofounders Vlad Tenev and Baiju Bhatt could receive up to $1.4 billion worth of Robinhood stock each, an SEC filing from June said.

Robinhood, which counts 17.7 million monthly active users, holds $81 billion in assets under custody, its filing says. It also says it has 22.5 million funded accounts, or those tied to a bank account, up from 18 million in the first-quarter this year, far above the 40,000 accounts it counted in 2014.

Revenue for the first quarter of 2021 came in at $522 million, up from $128 million in the same period last year. The company expects to report second-quarter revenue in the range of $546 million and $574 million, marking a 129% jump from the $244 million made in the second-quarter last year.

Robinhood was valued at $11.7 billion in a private fundraising round late last year. But based on trading in the secondary market, Bloomberg Intelligence analyst David Ritter had previously estimated it could be worth as much as $40 billion.

Goldman Sachs, Barclays, Citigroup, and JPMorgan are the lead underwriters on Robinhood’s IPO, among other banks.

Read More: Memeification vs manipulation: The creator of a site designed to find meme stocks shares how to track Reddit momentum and find frauds – and lists the 9 meme stocks with the most loyal fanbases

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An Amazon warehouse’s IPO plans show how loyalty to the e-commerce giant can breed success for its contractors

Parcels are stored in a truck in a logistics centre of the mail order company Amazon.
Parcels are stored in a truck in a logistics centre of the mail order company Amazon.

  • ROX Financial wants to buy a Bay Area Amazon warehouse and take it public.
  • It wants to buy up more facilities in the future to also lease to the e-commerce giant.
  • The move shows how contractors can piggyback off of Amazon’s success – only if they’re loyal to the firm.
  • See more stories on Insider’s business page.

A company wants to buy a warehouse that is leased to Amazon and take it public under the ticker AMZL, according to a securities filing, possibly making it the first company with a single property to publicly trade in the US.

Newly-formed ROX Financial hopes to raise $84 million as it forms a real-estate investment trust, or REIT, to purchase the 146,000-square-foot warehouse in the San Francisco Bay Area from its current owner. That warehouse was built last year to carry out last-mile delivery orders for customers and houses some of Amazon’s signature blue and grey delivery vans.

The warehouse is leased to Amazon for 12 years under its current owner, according to The Wall Street Journal, which first reported the news. It’s unclear if the warehouse is solely leased to Amazon. An industry trade association source told the paper that a real estate company with just one property has never publicly traded in the US before.

ROX Financial plans to use its IPO to expand its real estate portfolio with more warehouses to lease to Amazon.

“We intend to build Series AMZL into a curated portfolio of logistics properties in one or more locations leased by Amazon.com Services LLC, or Amazon, or its affiliates,” its prospectus says.

Amazon did not immediately respond to Insider’s request for comment.

But that single property is used to help power Amazon’s sprawling e-commerce business, giving the property owner a major advantage.

And if ROX Financial succeeds in collecting facilities that are leased exclusively to Amazon, it could prove that loyalty to the tech giant could fuel contractors’ success.

Amazon has seen sweeping success in the past year as the pandemic drove sales skyward. That success has helped grow an entire mini-economy of contractors that circulates the e-commerce giant, from third-party sellers to trucking companies to other logistics partners.

Third-party sellers raked in more than half of Amazon’s $386 billion net sales in 2020, and the company is recruiting more. It’s adding 3,700 new sellers daily, according to a study from research firm Finbold, suggesting that Amazon is aware that independent merchants can help it succeed.

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China’s ‘wolf warrior diplomacy’ has come to Wall Street

Xi jinping at CCP 100th anniversary
Chinese President and Chairman of the Communist Party Xi Jinping appears on a large screen as performers dance during a mass gala marking the 100th anniversary of the Communist Party on June 28, 2021 at the Olympic Bird’s Nest stadium in Beijing, China.

  • China’s assertive, nationalistic behavior – known as “wolf warrior diplomacy” – has come to the financial markets.
  • This week Beijing punished a Chinese tech company that listed on the New York Stock exchange, and announced rules to govern all Chinese companies listed abroad.
  • Consider this part of the Chinese Communist Party tightening its grip on power at home, and closing its doors power from abroad.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

It was only a matter of time before Beijing’s heightened nationalism came to Wall Street.

This week, Chinese authorities punished Didi, a ride sharing company, for its June 30 public debut on the New York Stock Exchange. Shortly after the Didi crackdown, Beijing announced new measures that could restrict Chinese companies going public abroad.

What all this is telling us is that Beijing is no longer going to tolerate its tech stars making foreigners rich on foreign exchanges. And it is further evidence that China is closing its society and economy to the West.

Bring it all back home

In order to more freely list on foreign stock exchanges, Chinese companies create something called a “variable interest entity.” In such an arrangement, a Chinese company creates another company in a tax haven like the Cayman Islands where foreigners can invest. The Chinese company then signs an agreement that gives control and profits to the Cayman entity, from which money is distributed to shareholders and the company back in China. For years, Beijing generally looked the other way when it came to VIEs.

Now, according to Bloomberg, Beijing’s new regulations are designed to limit the ability of Chinese companies to set up these entities. The proposed rules would govern what data can and can’t be shared abroad, target “illegal securities activities,” and set up extra-national laws Chinese companies would have to follow regardless of where they are listed.

Didi shares are down around 20% since it’s IPO, in part because Beijing announced these measures, and in part because it has become a target for authorities at home. On July 2, the Cyberspace Administration of China announced it was investigating Didi. Two days later China’s app stores were ordered to stop allowing users to download Didi. The CAC claims that Didi was illegally collecting user data.

And perhaps that’s true. But it’s also likely that this is a signal that “wolf warrior” aggression – a kind of Chinese diplomacy named after a hyper-nationalistic film- has come to financial markets. Two other Chinese tech companies listed in the US – Kanzhun and Full Truck Alliance – also had their downloads halted by Chinese regulators. The almost 250 Chinese companies worth $2 trillion in market cap listed on major US exchanges should all be watching their backs.

China is closing

There are two main reasons for this seemingly sudden crackdown – one is China’s increasing antagonism with the West, and the other is the Chinese Communist Party’s own desire for power and self-preservation. Together they amount to the reality that China is once again closing its doors to the world, reversing the opening that began in the 1970s.

As part of a larger crackdown on civil society, the Chinese Communist Party has been tightening its control over any sources of power that might challenge it at home. That includes tech billionaires like Alibaba founder Jack Ma, who has recently been publicly brought to heel by Beijing. And it includes tech companies, like Tencent and Pinduoduo, another e-commerce giant.

Targeting tech companies that list abroad also puts pressure on Chinese companies to consider an IPO to list in Shanghai or Hong Kong instead. It is no secret that China’s encroachment into Hong Kong prompted an exodus of financial firms from the city. Making it the new landing place for Chinese tech companies to go public could help it maintain its status as a global financial center.

It is also no secret that the US and China are at risk of what some call “decoupling”– essentially breaking ties and creating a world with separate US or China-centric technologies and financial centers. In some ways, because the two powers have become so antagonistic, this is already happening. Domestically, Beijing has been investing in technological advancements with the hopes making the country a techno-superpower by 2025. Now it’s calling its companies home.

What’s doubly important is that none of the above is primarily about making China rich. It’s all about hoarding power for the CCP. Under President Xi Jiinping that has become Beijing’s motivation above all else, and we should all expect it to act accordingly – even when it means hurting its own domestic companies.

A chilling effect

Last year Congress passed the Holding Foreign Companies Accountable Act, which requires foreign companies listed on US stock exchanges to be audited by the Public Company Accounting Oversight Board’s. If they refuse for three years in a row they can be delisted. Last month, the Senate passed a law that would shorten the time frame to two years in a row.

The problem with this is that so far, Chinese regulators will have absolutely none of it.

This is a stare down. If Chinese companies listed here in the US do not comply they will be delisted. If they do comply Beijing could come down hard on these companies at home. In the meantime recriminations are flying. GOP Sen. Marco Rubio of Florida called the Didi IPO “reckless and irresponsible” weeks before Beijing clamped down on the company, arguing that Didi is a black box.

Rubio and Democratic Sen. Senator Bob Casey of Pennsylvania introduced a bill in May that would prohibit companies from going public on US exchanges if they do not comply with US regulators and submit to an audit from the Public Company Accounting Oversight Board.

All of this pressure from Beijing and Washington will, without a doubt, have a chilling effect on Chinese companies listing here in the United States. So yes, this is another form of decoupling – and it’s coming from both sides of the Pacific.

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