China’s Luokung Technology sues US government over Trump’s investment blacklist

Americans could be barred from owning shares of Beijing provider of map and cloud software’s shares as soon as March 15
Luokung denied being owned or controlled by any entity associated with China’s military

Banking & finance

Chad Bray

Published: 8:00pm, 5 Mar 2021

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Luokung Technology sued the US government on Thursday, seeking to be removed from a blacklist barring American investors from owning shares of companies with purported ties to the Chinese military.

In a lawsuit filed in the US District Court in Washington, the Beijing provider of map software and services, and cloud platform software, said it could face a ban on Americans trading its stock as soon as March 15 after it was added to a government list in January in the waning days of the Trump administration. That ban would include its chief technology officer Baomin Li, an American citizen who owns 1 million of its shares, the company said.

The Nasdaq-listed company denied that it was “owned or controlled” by any entity affiliated with the Chinese armed forces and said its services are for commercial and civilian use.

“A ban on investments in Luokung by US investors will not only adversely affect Luokung’s ability to obtain capital from US investors and to engage in strategic transactions with US companies, it will likewise harm Luokung’s strategic relationships with US financial institutions,” Luokung said in the 29-page lawsuit.

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Luokung’s stock is only traded on the Nasdaq, where it has been listed since 2019. The company’s shares declined 3.4 per cent to US$1.13 on Thursday.

The company said it has been unsuccessful in learning the basis of its designation by the US Department of Defens,e and there is no available guidance on how to be removed from the blacklist.

Former US President Donald Trump issued an executive order on November 12 that barred American investors, including pension funds and university endowments, from owning or trading in companies the US claims are owned or controlled by the Chinese military.

The initial list created by the Defense Department last summer has grown to include dozens of Chinese companies, including CNOOC Limited, a unit of China National Offshore Oil Corporation (CNOOC), chip maker Semiconductor Manufacturing International Corp (SMIC) and smartphone manufacturer Xiaomi.

It has also resulted in the delisting of three of China’s biggest telecommunications providers – China Mobile, China Telecom and China Unicom – from the New York Stock Exchange (NYSE), a move the companies are challenging. CNOOC Limited itself is expected to be delisted on March 9 to comply with the executive order.

US President Joe Biden put a stay in January on some of the targeted entities, delaying until May 27 a ban on American investments in companies that have similar names to the blacklisted Chinese firms. That ban had been set to go into place on January 29.

The Biden administration is undertaking “complex reviews” of various Trump policies towards China, White House press secretary Jen Psaki said at the time.