Caixin
Aug 15, 2020 03:13 AM
FINANCE

ChiNext Set to Debut First Batch of Registration-Based IPOs Aug. 24

As of Friday, ChiNext has accepted 364 IPO applications.
As of Friday, ChiNext has accepted 364 IPO applications.

The first batch of companies registered for listing on Shenzhen’s Nasdaq-style ChiNext board under a revamped initial public offering (IPO) system will make their debuts Aug. 24, the Shenzhen Stock Exchange said Friday.

The exchange did not say how many companies will start trading Aug. 24, but as of the end of Friday, 18 companies have completed IPOs. They raised a total of more than 20 billion yuan ($2.89 billion), nearly 30% more than originally planned amid overwhelming investor demand.

The 18 companies represent industries including health care, automobiles, equipment manufacturing, environment protection, culture and entertainment. Anker Innovations Ltd., a maker of cellphone chargers and smart electronics, raised 2.72 billion yuan in the biggest of the IPOs. The smallest offering was by Ningbo KBE Electrical Technology Co. Ltd., a manufacturer of automotive cables, which raised 259 million yuan.

All of the 18 companies are profitable, with average earnings of 167 million yuan last year, more than meeting ChiNext’s requirement of accumulated net profit of at least 50 million yuan.

Performing event planner Beijing FengShangShiJi Culture Media Co. Ltd. achieved the highest IPO price at 138.02 yuan a share, while the lowest was 10.16 yuan by medical instruments manufacturer Contec Medical Systems Co. Ltd. The average P/E ratio was 39.25.

Investors are rushing to subscribe for new stocks online in the hope of large price jumps on their debuts. The average probability of being able to get a piece of each of the 18 stocks was about 0.0177%, according to Caixin calculations.

In 2019, 98 new stocks were listed on the ChiNext board, and their prices rose by an average of 96.8% in the first 10 days of trading.

Daily moves for the first five days of trading of new stocks are no longer subject to daily price limits. After the first five days, ChiNext has also doubled daily price-change limits for all stocks to 20%, following similar moves by Shanghai’s new tech board, the STAR Market. Previously all listed stocks in China were subject to a 10% limit on daily moves.

ChiNext adopted registration-based IPOs to replace the previous approval-based system in June, about one year after the STAR Market first launched the mechanism. The aim was to improve the Chinese mainland’s market appeal to technology companies and to encourage them to list at home rather than abroad.

Under China’s approval-based IPO mechanism, the China Securities Regulatory Commission (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 Friday, ChiNext has accepted 364 IPO applications, among which 204 are in the inquiry stage, 39 companies have submitted registration with the CSRC and 23 registrations have become effective.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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