Amidst a Shifting Regulatory Environment, Focus on U.S. Capital Markets Remains Strong

Historically, the United States capital markets, including the primary trading markets of the New York Stock Exchange and Nasdaq, have been viewed as among the most desirable markets for non-U.S. companies seeking to list their securities and to raise capital. This has been particularly true for companies with significant operations in China and elsewhere in Asia, where the listing process in Hong Kong and in other markets can be perceived as burdensome and without the valuation uplift and more abundant liquidity offered by the more robust U.S. trading markets. 

However, in recent years, a number of regulatory and political shifts have altered this balance, resulting in a perception that the U.S. capital markets are less welcoming and present new challenges for companies organized outside the United States, including those with significant operations in China. 

In particular, the evolving landscape around environmental, social, and governance (ESG) issues has been particularly notable. While ESG commitments have long been viewed as cornerstones of sustainable business strategy and investor confidence, ESG has emerged as a fierce focal point in U.S. political debates—particularly around climate action and diversity, equity, and inclusion. For non-U.S. companies with U.S. listings or those considering U.S. listings, the resulting legal and regulatory shifts are worthy of careful attention.

Since the 2024 U.S. presidential election, the federal government has rolled back many ESG-related initiatives. Executive actions have curtailed clean energy incentives, halted progress on climate disclosure rules, and targeted diversity, equity, and inclusion (DEI) programs within both federal agencies and corporations. The U.S. Securities and Exchange Commission has rescinded prior guidance that once supported broad shareholder proposals on climate and diversity issues, signaling a narrower approach.

For non-U.S. companies accustomed to stricter ESG mandates in their home jurisdictions, this federal retrenchment creates both compliance uncertainty and reputational tension. Non-U.S. companies with current or future listings in the U.S. can be left in a challenging position where the failure to meet home-country ESG standards can lead to regulatory penalties and reputational damage in global markets—yet robust ESG commitments that satisfy these rules may increase litigation exposure in the U.S., where opponents are challenging climate and DEI initiatives in courts and through shareholder activism. This tension forces foreign companies with U.S. listings to balance complying with binding foreign requirements while avoiding potential U.S. claims by activists opposed to ESG.

In addition to these ESG-related issues, non-U.S. companies that are or may become public are facing other areas of regulatory uncertainty, including:

• The SEC has issued a concept release soliciting input on changing the definition of a “Foreign Private Issuer” (or FPI) to require companies seeking to list in the U.S. and take advantage of FPI exceptions to the U.S. disclosure and corporate governance requirements to also be listed on another major non-U.S. exchange. If adopted, this could cause a number of issues for foreign issuers that do not satisfy a new FPI definition, including increasing disclosure and compliance obligations and requiring that these companies report their financial results in U.S. GAAP rather than IFRS or local GAAP.
• The Nasdaq stock exchange has recently proposed a number of rule changes that would tighten listing standards, which are particularly targeted at companies with significant Chinese operations. The changes include a minimum initial public offering size of $25 million for Chinese companies, higher public float requirements and an accelerated delisting process. While the New York Stock Exchange has not yet proposed similar rule changes, it has echoed concerns raised by U.S. regulators about transparency and investor risk related to offerings by Chinese companies.

Taken as a whole, these shifts in the political and regulatory environment have created a unique scenario. On the one hand, some companies that are already public in the U.S. are evaluating take-private and other options to discontinue public reporting so that they are no longer subject to U.S. securities law regulatory requirements and uncertainty. Meanwhile, other companies continue to be very focused on the U.S. capital markets as a means to raise growth capital or as a mechanism to achieve exits to satisfy commitments made to private equity and other investors. This includes companies seeking traditional IPOs as well as a renewed interest in pursuing going public through de-SPAC transactions.

Given the broader regulatory environment and the competing interests of reducing exposure to regulatory uncertainty in the U.S. versus accessing the U.S. capital markets, it is more critical than ever to retain sophisticated counsel that have deep experience in both the company’s home geography and the U.S. capital markets, including with respect to balancing ESG mandates and navigating U.S. securities law regulatory requirements and litigation risks. Since 2020, MoFo has played a key role in these types of transactions, structuring and advising on both high-profile take-private transactions as well as IPO and de-SPAC transactions in the United States.

Read more in the Asia Funds ESG + Sustainability Survey 2025 Report.