Caixin
Jul 14, 2020 07:54 PM
FINANCE

First Companies Get Nod for Registration-Based IPOs in Shenzhen

A registration-based mechanism is widely believed to be more market-oriented than the approval-based one that applies to all mainland boards except for ChiNext and the STAR Market.
A registration-based mechanism is widely believed to be more market-oriented than the approval-based one that applies to all mainland boards except for ChiNext and the STAR Market.

The Shenzhen Stock Exchange gave the green light on Monday to the first three companies seeking to list on its Nasdaq-style ChiNext board under a registration-based IPO mechanism, according to a bourse statement (link in Chinese).

The three companies — cultural event planning company Beijing FengShangShiJi Culture Media Co. Ltd., medical-device maker Contec Medical Systems Co. Ltd., and package printing company LD Intelligent Technology Co. Ltd. — have “met the requirements for issuance, listing and information disclosure,” said the Shenzhen Stock Exchange.

The bourse must now file the companies’ listing registrations with the China Securities Regulatory Commission (CSRC), the country’s top securities watchdog, according to CSRC rules (link in Chinese). The regulator has up to 15 working days to decide whether to consent to the registrations.

China introduced the registration-based IPO procedure for the ChiNext board earlier this year, about a year after it launched the mechanism on Shanghai’s new tech board, also known as the STAR Market. The aim was to improve the Chinese mainland’s market appeal to technology companies and to encourage them to list at home rather than overseas.

A registration-based mechanism is widely believed to be more market-oriented than the approval-based one that applies to all mainland boards except for ChiNext and the STAR Market.

Under China’s approval-based IPO mechanism, the CSRC vets every application. It is unpredictable and prone to corruption because of the power it gives officials to approve or reject applications. The mechanism also imposes stringent conditions on companies and gives them little control over the price at which they offer their shares. Approvals can take months, or even years.

As of Tuesday, more than 280 companies have applied to list on the ChiNext board under the registration-based mechanism, according to bourse data (link in Chinese).

Contact editor Lin Jinbing (jinbinglin@caixin.com)

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