[Preview of the Weekly] IPOs Face a Chill; Private Equity Buybacks and Counter-Bets Turn into Grey Rhinos (AI Translation)
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- Wanda Group faced challenges with its IPO buyback guarantee, risking having to return 38 billion yuan plus 8% annual interest to investors if its subsidiary Wanda Commercial Management Group failed to complete an H-share IPO by the end of December 2023. A last-minute agreement with investors was reached on December 12, introducing new investors and redefining the transaction framework, temporarily averting the crisis.
- The Chinese private equity market is highly dependent on IPOs for exits, but with a significant slowdown in domestic and overseas listings and a backlog of over 700 companies waiting for IPO approval, many PE/VC-backed companies are unable to meet their IPO timelines, triggering buyback clauses that act like ticking time bombs.
- The tightening of IPO issuances has had immediate impacts on the industry. With over 200 companies withdrawing their listing plans in 2023 alone and a drastic reduction in exit opportunities for PE/VC investments, there's a growing trend of arbitration cases where investors sue founders for failing to fulfill buyback agreements. This situation is exacerbated by regulatory changes that may further challenge smaller private equity firms' survival due to increased investment thresholds and compliance requirements.
文｜财新周刊 岳跃
By Caixin Weekly's Yue Yue
王健林的万达集团也未能逃过IPO回购对赌的困扰。万达旗下万达商管若不能在2023年12月底前完成H股IPO，万达不仅要向投资人归还380亿元的投资本金，还要按8%的年利率支付利息。大限将至的最后关头，12月12日，万达与投资人签署了新的投资协议，就重新估值重定交易框架，并引入新的投资人，对赌危机暂时解除。
Wang Jianlin's Dalian Wanda Group has not been able to avoid the troubles of IPO buyback gambling agreements. If Wanda Commercial Management, a subsidiary of Wanda, fails to complete its H-share IPO by the end of December 2023, Wanda will not only have to return the principal investment of 38 billion yuan to investors but also pay interest at an annual rate of 8%. As the deadline loomed, on December 12th, Wanda signed a new investment agreement with investors to reassess and redefine the transaction framework and introduce new investors, temporarily averting the crisis.
但绝大多数被PE/VC机构投资的拟上市企业，很难像万达这样宁愿付出估值接近减半的代价，也要与投资人达成免于履行回购对赌的方案。
However, the vast majority of companies planning to go public that are invested in by PE/VC firms find it difficult to follow Wanda's example, who would rather pay a price close to halving their valuation in order to reach an agreement with investors that frees them from fulfilling buyback obligations tied to performance wagers.
在中国私募股权基金大爆发的2017年，上万只PE/VC基金纷纷成立，它们大多是“5+2”的结构，即投资期5年、退出期2年，因此2023年已到退出大年。但最近一段时间以来，境内上市和境外上市都已经降至冰点，沪深交易所IPO已连续数月零受理，排队过会的企业超700家，“堰塞湖”再次高悬。
In the explosive year of 2017 for China's private equity funds, tens of thousands of PE/VC funds were established, most with a "5+2" structure—five years of investment followed by two years for exits. Consequently, 2023 has arrived as a major year for exits. However, in recent times, both domestic and overseas listings have plummeted to freezing points. The Shanghai and Shenzhen stock exchanges have seen months of zero IPO acceptances in a row, with over 700 companies queued up for approval, leading to a looming "dammed lake" situation once again.
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