Executive Order 13959 Sees Its First Casualties

On November 12, 2020, President Donald Trump signed Executive Order 13959. The Order’s goal is “Addressing the Treat From Securities Investments That Finance Communist Chinese Military Companies”.

The executive order prohibits all U.S. Investors (institutional and retail alike) from purchasing or investing in securities of companies identified by the U.S. government as “Communist Chinese military companies.” The prohibition went into effect on January 11, 2021, and immediately resulted in its first casualties, with 3 listed stocks being delisted and several OTC stocks having their symbols deleted.

Initially, 31 companies were identified, including two exchange-listed companies and 6 companies traded on the OTC Markets. The list included companies involved in aerospace, shipbuilding, construction, technology, and communication industries. 

On December 3, 2020, the Department of Defense designated four additional companies as owned or controlled by the Chinese military, including one that trades on the OTC Markets, taking the total number of affected companies to 35.

On January 14, 2021, the Department of Defense designated nine additional companies as owned or controlled by the Chinese military, including one company that trades on the NASDAQ and one more company that trades on the OTC Markets, taking the total number of companies to 44.

The first casualties came on January 11th when the NYSE delisted the three exchange-listed companies, China Mobile Limited (CHL), China Telecom Corporation Limited (CHA), and China Unicom (Hong Kong) Limited (CHU). 

That same day, FINRA deleted the trading symbols of several of the companies that traded on the OTC Markets, including China Communications Construction Company (OTC: CCCGF/CCCGY), China Railway Construction Corporation (OTC: CWYCF/CWYCY), China State Construction Engineering (OTC: CCOHY/CCOHF), CRRC Corporation (OTC CHTEF/CRCCY/CRRRF), Inspur (OTC: INPRF), Panda Electronics (OTC: NJGPF), and Semiconductor Manufacturing International Corporation (SMICY/SIUIF).

The NYSE delisting process was not without its controversy. On December 31, 2020, the exchange announced its intent to delist China Mobile (CHL), China Telecom (CHA), and China Unicom (CHU), pursuant to Executive Order 13959, which would go into effect on January 11, 2021. The announcement caused the share price in the three companies to plummet and immediately received backlash from the Chinese government

However, on the evening of January 4, 2021, the NYSE briefly reversed course after consulting with relevant regulatory authorities. All three stocks saw decent gains on January 5, 2021. China Mobile increased by 10 percent, China Unicom increased by more than 13 percent, and shares of China Telecom increased by 7 percent. 

Then, on January 6, 2021, the NYSE reversed course again, saying that it would move forward with the delisting to comply with U.S. Law. Trading in all three stocks ceased after 9:30 am eastern time on January 11, 2021.

NASDAQ has yet to announce any plans to delist Luokong Technology Corp (LKCO) since it was added to the banned company list on January 14, 2021, but LKCO did issue a statement today.  Luokong stated that its services and products are used for civilian or commercial purposes or for public services. The company is not owned, controlled by or affiliated with the Chinese military, nor is it a Chinese military company under the statutory definition of the National Defense Authorization Act. The company says that it plans to take appropriate measures to protect the interests of the company and its shareholders. The LKCO share price fell 18% following the announcement. 

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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