Why Is Baidu (BIDU) Stock Down Today?


Baidu (NASDAQ:BIDU) is in the spotlight this morning after the U.S. Securities and Exchange Commission warned that its shares could be removed from the Nasdaq exchange. The SEC included Baidu on a list of foreign firms that are failing to comply with auditing requirements that are a part of the 2020 Holding Foreign Companies Accountable Act, or HFCAA. BIDU stock is currently down 6% in morning trading.

A Baidu (BIDU) sign outside a company office in Shenzhen, China.
Source: StreetVJ / Shutterstock.com

So what else do you need to know?

Baidu operates the largest internet search engine in China, and in recent years, has become heavily involved in other technologies, including self-driving vehicles and artificial intelligence. BIDU stock has fallen 16% in the last month and 38% in the last year.

The SEC added other prominent names to the list list today including iQiyi (NASDAQ:IQ) and Futu (NASDAQ:FUTU). A subsidiary of Baidu, iQiyi hosts online videos and is sometimes described as the “YouTube of China,” while Futu “operates an online brokerage and wealth management platform in Hong Kong and internationally.”

What Happened With BIDU Stock

Under the HFCAA, foreign firms are supposed to be ejected from American stock exchanges if they do not meet the auditing standards of the Public Company Accounting Oversight Board, or PCAOB. The legislation also forces foreign firms “to disclose whether a foreign government owns or controls them,” Yahoo reported earlier this month. The SEC has recently added a handful of Chinese companies to a list of firms that do not meet these auditing standards.

However, a spokesperson for a Chinese securities regulator maintained that, “Whether the companies added to the list would be delisted will depend on the result of the negotiation between China and the US over their cooperation in audit regulation.”

Yesterday, referring to those talks, SEC Chair Gary Gensler told Bloomberg that “There have been thoughtful, respectful, productive conversations, but I don’t know where this is going to end up.” Gensler has said that the HFCAA requires that China allow the PCAOB to evaluate the auditors of Chinese companies.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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