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Chinese car and battery maker BYD owns 72.3 per cent of its chip-making unit BYD Semiconductor. Photo: LightRocket via Getty Images

BYD suspends US$414 million IPO plan of semiconductor unit amid investigation into law firm advising on the deal

  • Shenzhen Stock Exchange suspended reviewing BYD Semiconductor’s IPO application on August 18
  • BYD’s chip-making unit may need to replace the law firm which in turn has three months to complete the due diligence
BYD, the Warren Buffett-backed Chinese battery and carmaker, has put on hold the proposed spin off of its semiconductor unit, after the mainland regulator launched an investigation into the law firm advising on the deal.
The Shenzhen Stock Exchange said in an announcement on Saturday that Beijing Tian Yuan Law Firm was being investigated by the China Securities and Regulatory Commission, without giving further details.
The applications of 14 other firms seeking to list on the exchange’s ChiNext board were also suspended because the law firm was advising them too. The exchange said that it had suspended handling IPO applications since August 18.
BYD in May announced that it would list its 72.3 per cent owned chip-making unit BYD Semiconductor on ChiNext, a Nasdaq-like tech board, with the aim of raising 2.69 billion yuan (US$413.83 million).


Behind the scenes at BYD Auto: China’s biggest electric vehicle factory

Behind the scenes at BYD Auto: China’s biggest electric vehicle factory

BYD Semiconductor will proceed with the due diligence as soon as possible, while the company was not yet sure if it would need to change the law firm as yet, a spokeswoman said.

Beijing Tian Yuan Law Firm did not respond to a request for comment.

As per the exchange’s rules, BYD Semiconductor and the other candidates can resume their applications when the investigation into the law firm is completed or if they change their law firms. The new advisers have three months to conduct due diligence and check the work of the previous lawyers for the applications to proceed further. If the reviews are satisfactory, the IPO candidates can resume their listing plans.

The suspension of BYD Semiconductor and the 14 other companies’ fundraising plans comes amid increased regulatory scrutiny of Chinese technology companies by mainland regulators, ranging from antitrust to cybersecurity and data usage to the quality of their advisers. While this is a part of Chinese policymakers’ bid to improve the quality of the market it is also hurting companies, forcing them to pause their listing plans.


There’s a global semiconductor chip shortage and this is why it matters

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The suspension of BYD Semiconductor’s spin-off plan did not have any impact on carmaker’s Hong Kong-listed shares. BYD closed 4.8 per cent higher on Monday. Its Shenzhen-listed shares added 1.6 per cent.

Analysts said the setback to BYD Semiconductor’s listing plan was likely to be temporary.

“The suspension of the spin off plan can be resolved by appointing a new lawyer,” said Kenny Ng Lai-yin, a strategist at Everbright Sun Hung Kai Securities. “Investors have confidence that the spin-off plan will go ahead eventually.”

Beijing Tian Yuan Law Firm was founded in 1992, one of the earliest partnership law firms in China and now has 150 partners and more than 600 practitioners, according to its website. The Beijing-headquartered law firm has 11 branches, including Shanghai, Shenzhen, Chengdu, Hangzhou and Hong Kong. It is active in offering advice in capital market services, such as IPOs, mergers and acquisitions and asset management.

Additional reporting by Daniel Ren in Shanghai

This article appeared in the South China Morning Post print edition as: BYD holds spin-off amid law firm probe