Foreign microcap IPOs dry up in US

TINY foreign companies are finding it much harder to list in the United States this year, as tougher regulatory scrutiny and tighter exchange rules dramatically reduce the flow of small overseas initial public offerings (IPOs).

The sharp slowdown marks a significant shift for a corner of the market that had exploded in popularity in 2025, only to become the focus of growing concerns over alleged pump-and-dump schemes that left retail investors nursing heavy losses, according to a Bloomberg report.

The newswire reported that only 13 companies with very small market capitalisations (microcaps) have completed IPOs on Nasdaq and the New York Stock Exchange (NYSE) so far this year, a steep decline from almost 80 at the same point in 2025.

Just two of those new listings are Asian companies, compared with almost 100 Asia-based microcaps that debuted on US exchanges throughout last year.

The fundraising figures paint an equally stark picture.

Combined, this year’s microcap IPOs have raised less than US$300mil, with only one company securing as much as US$40mil while the rest collected under US$25mil each.

By comparison, nearly 140 microcap IPOs raised around US$1.6bil in 2025 before many of their share prices experienced dramatic swings.

The slowdown follows months of increasingly aggressive action by US regulators and exchanges aimed at curbing suspected market manipulation involving newly listed foreign companies, particularly those from Asia.

Pump-and-dump schemes

US authorities have repeatedly warned that certain overseas microcap companies with limited operating histories and aggressive social media promotion became vehicles for alleged pump-and-dump schemes.

In such schemes, fraudsters accumulate shares, promote the stock heavily through online forums and messaging platforms, then sell into the surge, leaving retail investors with steep losses after prices collapse.

“There was a resounding message from market participants that there was a problem here and that something needed to be done,” Jamie Selway, chief of the US Securities and Exchange Commission’s (SEC) division overseeing trading and markets, told Bloomberg.

The SEC, together with market participants including Citadel Securities and Charles Schwab, has been raising concerns for several years about the risks associated with thinly traded overseas microcap companies.

Those concerns intensified during 2025 as record numbers of small companies came to market.

A Bloomberg analysis published earlier this year found evidence suggesting that promotional campaigns on WhatsApp, followed by sharp share price collapses, affected around a quarter of the smallest companies listed on Nasdaq since 2023.

Most of those companies were based in Asia.

The growing scrutiny has prompted Nasdaq to strengthen its listing framework.

Greater scrutiny

Rules introduced in December give the exchange broader discretion to reject IPO applications even if companies technically satisfy financial listing requirements. Nasdaq can now examine factors such as the backgrounds of auditors, underwriters and legal advisers involved in an IPO, alongside the trading history of similar companies, before approving a listing.

The exchange has also introduced additional requirements targeting companies headquartered in China and Hong Kong, including higher fundraising thresholds before they can list.

According to a Nasdaq analysis cited by Bloomberg, 143 out of 151 China-based companies that listed between August 2022 and April 2025 would not have qualified under the tougher standards now in place.

“The numbers speak for themselves,” Mark Donohue, founder of regulatory consultancy Thirty4 Advisory and a former SEC policy adviser, told Bloomberg.

“With the SEC’s statements on these matters and the Nasdaq’s efforts to tighten its listing programme, the writing is on the wall for both the issuers and those trying to manipulate the stocks.”

The regulatory clampdown has also resulted in numerous trading suspensions.

Among the companies caught up in regulatory action was Hong Kong-based QMMM Holdings Ltd, whose shares surged almost 1,000% in less than three weeks after announcing plans to enter the cryptocurrency business.

The SEC suspended trading last September, citing concerns over potential manipulation through social media, while Nasdaq has since begun the process of removing the company from its exchange.

Bloomberg noted that regulators have not accused QMMM of participating in any manipulation scheme.

Smart Digital Group Ltd, originally based in Singapore before relocating operations to mainland China, also had its trading suspended by the SEC over similar concerns and was delisted by Nasdaq earlier this month.

Other companies have found themselves under increased scrutiny without being accused of wrongdoing.

Japan’s Micware Co and Hong Kong-based Green Circle Decarbonize Technology Ltd, the only two Asian microcap IPOs completed in the United States this year, have both seen their share prices fall by more than half since listing.

Micware chief financial officer Takuma Segawa told Bloomberg he did not believe the company’s shares had been targeted by illegal manipulation but acknowledged that recent events had made entering the US market more daunting.

“As a Japanese company, we are new to the US stock market,” he said. “And it can be very scary.”

Green Circle disclosed in March that the NYSE had contacted the company after observing unusual trading activity, although no allegations of wrongdoing have been made.

Balancing act

While the crackdown has succeeded in reducing questionable listings, Bloomberg reported that it is also slowing the pipeline of legitimate companies seeking access to US capital markets.

More than a dozen US-based microcap companies and nearly 40 Asia-based companies that filed listing paperwork since the beginning of 2025 have yet to make their market debut.

Law firm Lucosky Brookman managing partner Joseph Lucosky said companies are already experiencing the effects of heightened regulatory scrutiny.

“Literally, they could say no if they don’t like the colour of your tie,” he told Bloomberg, referring to Nasdaq’s broader discretionary powers.

At the same time, Lucosky believes raising listing standards could ultimately strengthen investor confidence by filtering out weaker businesses and creating a healthier environment for genuine growth companies seeking capital.

However, he also warned that regulators must strike the right balance between protecting investors and preserving access to public markets.

Scores of investors, biotech firms and industry groups have already voiced concerns over another Nasdaq proposal currently under SEC review that would make it easier to delist companies whose market value remains below US$5mil for 30 consecutive days.

Critics argue such measures could prematurely remove hundreds of struggling but viable companies from public markets, limiting their ability to raise fresh capital just when they need it most.

The debate comes as the SEC under US President Donald Trump’s second administration continues promoting capital formation and encouraging companies to go public.

Bloomberg noted that 2026 has already delivered several blockbuster IPOs, including SpaceX’s record-breaking listing and expectations of another major flotation involving artificial intelligence firm Anthropic.

Yet regulators insist encouraging more IPOs cannot come at the expense of investor protection.

“If an IPO raises US$10mil for a foreign issuer but results in hundreds of millions of dollars of losses of retail investor funds through these pump-and-dump schemes, that is a net negative for capital markets,” SEC enforcement director David Woodcock told Bloomberg.