In a letter to Chief Executive Officer Ted Pick dated Nov. 13, Representative John Moolenaar requested more information from Morgan Stanley including documents and communications related to the transaction, which at the time was the world’s largest such offering since May.
At issue is how the transaction may have helped Zijin Gold’s parent, Zijin Mining Group, which is on a US blacklist for allegedly violating restrictions on using forced labor in the Xinjiang region of China. In his letter, Moolenaar questioned whether the deal was “structured to consolidate Zijin Mining’s overseas gold assets under a separate entity, while allowing Zijin Mining to remain the controlling shareholder.”
“Morgan Stanley’s participation raises serious potential concerns about the adequacy of its due diligence practices in connection with a company that is included on a U.S. government entity list, is associated with human rights abuses, and maintains deep ties to the Chinese Communist Party,” Moolenaar wrote in the letter.
A Morgan Stanley representative didn’t immediately respond to requests for comment.
Morgan Stanley and Citic Securities Co. led the IPO, which is Hong Kong’s second-largest listing this year, behind Contemporary Amperex Technology Co. Ltd.’s $5.3 billion mega deal. Zijin Gold’s Hong Kong shares climbed 68% in their first day of trading, and have doubled since the debut.
Moolenaar said that his request for information from Morgan Stanley was part of a broader review being conducted by the House Select Committee on China into the involvement of Wall Street banks in IPOs of Chinese companies with known ties to China’s military or past track records of labor abuses.
“Morgan Stanley’s underwriting of Zijin Gold’s IPO showcases the very type of commercial activity the US government seeks to prevent,” he wrote.
The letter comes after the House of Representatives’ Select Committee on the Chinese Communist Party, the group led by Moolenaar, subpoenaed JPMorgan Chase & Co. and Bank of America Corp. in July over their role in CATL’s Hong Kong listing.
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