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Why Shares of BeiGene and Zai Lab Are Tanking Today

By George Budwell – Dec 15, 2021 at 3:33PM

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The threat of a forced delisting is weighing heavily on these two Chinese biotech stocks.

What happened

Shares of BeiGene (BGNE -0.12%) and Zai Lab (ZLAB -10.75%) were down by 13% and 15%, respectively, as of 2:40 p.m. ET Wednesday. These two Chinese biotechs were getting crushed over fears that they might eventually be forced to delist from the Nasdaq stock exchange. 

Rising tensions between Beijing and Washington are stoking concerns about a possible mass migration of American-listed Chinese equities over to exchanges in Hong Kong or Shanghai. But that shift would cost those Chinese companies their access to the massive pool of U.S. investors.  

An investor drawing a red, downward trending line.

Image source: Getty Images.

So what

BeiGene and Zai Lab were being hit particularly hard Wednesday due to a report from investment bank Morgan Stanley. The report noted that the two biotech companies sport some of the highest levels of American ownership among Chinese companies with market caps greater than $1 billion that are listed on a major U.S. stock exchange.

So, with their potential delistings looming, it's not exactly surprising to see investors hit the exits today. However, neither BeiGene nor Zai Lab have made any public comments about whether or not they expect to delist from the Nasdaq stock exchange. The sell-off, therefore, might be a tad premature. That being said, U.S. regulators are in the process of finalizing new rules that will make it much harder for Chinese firms to remain compliant with the listing requirements to remain on American stock exchanges. 

Now what

Are these two falling knives worth catching? With all the uncertainty swirling around BeiGene and Zai Lab at the moment, investors may want to take a cautious approach for now. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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