Jul 10, 2024 04:05 AM
FINANCE
Mass IPO Retreat in China as Stricter Listing Standards Come Into Force
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The CSRC published an updated checklist on April 30, which increases the random inspection rate to 20% of IPO candidates from 5%.
A staggering 315 Chinese companies have withdrawn their initial public offering (IPO) applications so far this year, with more than 100 pulling out in June alone.
The withdrawals followed the release of the National Nine Articles policies, which have led to stricter listing standards on the Shanghai and Shenzhen exchanges since April 30.
The new standards require that a company seeking a listing on the main board reports a net profit of at least 100 million yuan ($13.75 million) in the past year, while those seeking listing on the Growth Enterprise Market, known as the GEM, need to show a net profit of 60 million yuan.
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- 315 Chinese companies have pulled their IPO applications in 2023, with stricter guidelines causing a significant impact.
- New regulations from the National Nine Articles require main board candidates to show at least 100 million yuan in net profit, while GEM candidates need 60 million yuan.
- The CSRC's tighter oversight and increased penalties have led to cautious internal controls among brokerages, resulting in numerous IPO withdrawals, particularly from top firms.
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Who’s Who
- CITIC Securities Co. Ltd.
- CITIC Securities Co. Ltd. tops the list of brokerages affected by the stricter IPO regulations in China, with over 40 withdrawn IPO projects. Since Wu Qing became CSRC chairman in February, CITIC Securities has faced penalties as part of a broader crackdown, leading to increased internal controls and heightened scrutiny in their IPO processes.
- CSC Financial Co. Ltd.
- CSC Financial Co. Ltd. has experienced significant impact from the stricter IPO regulations, with over 20 of its IPO projects withdrawn. This places it among the top brokerages affected, alongside CITIC Securities, Haitong Securities, and China International Capital Corp. Ltd. The heightened regulatory scrutiny has led to tighter internal controls within the company.
- Haitong Securities Co. Ltd.
- Haitong Securities Co. Ltd. is one of the brokerages significantly impacted by the stricter IPO regulations in China. It has seen more than 20 of its sponsored IPO projects withdrawn this year. Additionally, the company has been penalized under the leadership of new CSRC chairman Wu Qing, as part of the increased scrutiny and higher internal control standards imposed on brokerages.
- China International Capital Corp. Ltd. (CICC)
- China International Capital Corp. Ltd. (CICC) is among the top brokerages impacted by recent stricter IPO regulations in China. It has seen more than 20 IPO projects withdrawn due to enhanced oversight and internal controls enforced by the China Securities Regulatory Commission (CSRC). Additionally, CICC is one of the major brokerages penalized since Wu Qing became CSRC chairman in February.
- Huatai Securities Co. Ltd.
- Huatai Securities Co. Ltd. is one of the top brokerages in China affected by the recent stricter IPO regulations. Along with others like CITIC Securities and CICC, it has faced penalties under CSRC chairman Wu Qing, leading to increased scrutiny and internal controls. This environment has caused significant IPO withdrawals, impacting their underwriting and sponsorship activities.
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What Happened When
- August 2023：
- The securities regulator's market rescue efforts began.
- February 2024：
- Wu Qing took over as CSRC chairman.
- February 7, 2024：
- There were 389 companies in the IPO queue.
- April 2024：
- The State Council issued the National Nine Articles policies.
- April 30, 2024：
- CSRC published an updated checklist, increasing the random inspection rate for IPO candidates to 20% from 5%.
- June 2024：
- More than 100 Chinese companies withdrew their IPO applications.
- June 21, 2024：
- 28 new IPO projects were accepted on the Beijing Stock Exchange after a 130-day drought.
- June 24, 2024：
- Nearly 150 pipeline companies released updated IPO announcements.
- By July 8, 2024：
- There were 184 companies in the IPO queue, down from 389 on February 7, 2024.
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