The number of China-based technology companies listing on American exchanges was a recent market narrative. You recall the Huya IPO, the Nio deal that we never really got, and Luckin Coffee’s meteoric rise. Heck, don’t forget , , and even (more here, here, and here, respectively).

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Looking back through our coverage is good reminder that a swath of China-based tech and venture-backed shops chose the U.S. markets.

Individually, of course, the debuts have been a varied mix of success and failure. Normal stuff. Today, however, there is a sharp, downward trend to most of the companies in question and the why isn’t good news. :

Trump administration officials are discussing ways to limit U.S. investors’ portfolio flows into China in a move that would have repercussions for billions of dollars in investment pegged to major indexes, according to people familiar with the internal deliberations.

The same report goes on to note that the current American government is also discussing “delisting Chinese companies from U.S. stock exchanges and limiting Americans’ exposure to the Chinese market through government pension funds.” The moves, in aggregate, could put negative pressure on China-based companies listed on American exchanges.

It’s Friday, so I’m going to avoid the usual throat-clearing. This is probably pretty stupid. The Chinese government is anti-democratic, increasingly autocratic, opposed to religious freedom, and is currently erasing an entire culture in Xinjiang. But that doesn’t mean that closing economic ties between our respective capital markets will make those situations any better. Indeed, it probably makes them worse; isolating a rival power isn’t a way to influence its actions if it has access to other markets.

Trade wars were said to be easy to win. Instead, we’re now seeing American investors take hits to their portfolios as the current administration looks to find leverage to summon even a small win.

The moves will limit the listing-pace of China-based companies on U.S. exchanges, making our domestic capital markets more provincial and less global. Meanwhile, the. Consider today, therefore, a coda of sorts on the boom in Chinese tech and venture-backed listings here in the United States.

Viva la self-inflicted wounds.

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Public cloud and SaaS companies, which have enjoyed a massive run-up in value in recent years, have fallen more sharply than tech stocks more generally. These recent price changes could slow the IPO pipeline, and possibly reprice private rounds into related private companies.

Down

Today is not the first time we’ve covered a negative gyration in the value of tech stocks. Indeed, you can read a few previous examples here from 2018 and here from 2017.

However, what’s notable in today’s down market is the sharpness of the retreat and the lack of positive news on the horizon. As analysts , it appears that things could get worse before they get better. Thinking narrowly to certain tech shares, the situation could limit short-term upside to stocks valued more on growth than profit fundamentals.

The market pain is not evenly distributed. At the time of writing, the Dow Jones Industrial Average and the S&P 500 are each down about 2 percent. The Nasdaq is off around 2.7 percent. And the Bessemer-Nasdaq cloud index of SaaS stocks is off 3.9 percent.

The damage is similarly varied as we zoom out. When we compare the Nasdaq and the Bessemer cloud index to their recent highs (also their 52-week highs, and all-time highs, for those keeping score), the Nasdaq is off 6.6 percent. That’s a steep decline in just a few trading sessions. However, cloud stocks in the Bessemer-demarcated basket are off a sharper 10.3 percent.

In stock market terms, a 10 percent price change is called . SaaS and cloud stocks are, therefore, in correction as of today compared to their recent highs.

From Highs, Lower Highs

It’s perhaps not panic time yet for cloud and SaaS companies who are public, and therefore not yet time for alarms among their private-market comps.

Why? Because SaaS and cloud stocks are trading at record highs, and at record valuation multiples. Indeed, as of the time of writing, still notes on its website that the stocks that make up its index are trading for historically high revenue multiples:

That’s still more than healthy. Indeed, when it was 10x, that was quite robust. Even, I’d argue a 9x enterprise value (EV) revenue multiple would be strong. Shifting a lot of stocks from an 11x average to a 9x average would involve pain, but the market would still be healthy for SaaS and cloud companies.

So what we’re seeing today is a correction, yes, but from very, very good to merely very good. If the declines continue, however, the situation could go from worrisome to bad quite quickly. And for private companies looking to defend their valuation and raise more money, neither situation is good. You don’t want market doubt when your valuation is illiquid.

Illustration: .