New board ap­peals to good tech firms

Sources say gov­ern­ment mulls of­fer­ing eas­ier ac­cess for fund­ing

China Daily (Latin America Weekly) - - Page Two - By WANG YANFEI and MA SI in Bei­jing

The first group of com­pa­nies to list on the new tech­nol­ogy in­no­va­tion board are ex­pected to be high qual­ity tech­nol­ogy firms with good growth po­ten­tial, as the gov­ern­ment looks to en­cour­age tech­nol­ogy de­vel­op­ment by giv­ing qual­i­fied com­pa­nies eas­ier ac­cess to fund­ing, ac­cord­ing to sources close to the na­tion’s se­cu­ri­ties reg­u­la­tor.

Com­pa­nies of a cer­tain scale that pos­sess promis­ing growth po­ten­tial will be the first to ben­e­fit from the new ini­tial pub­lic of­fer­ing plat­form, but de­fin­i­tive thresh­olds have not been ham­mered out and list­ing re­quire­ments are still in the works, sources said.

Un­like ear­lier mar­ket an­tic­i­pa­tion, the reg­u­la­tory frame­work of the new tech­nol­ogy in­no­va­tion board is not likely to be the same as the strate­gic emerg­ing in­dus­tries board in­tro­duced in 2015, and sources said, “reg­u­la­tors want some­thing new, so not so much can be bor­rowed from past ex­pe­ri­ence. They want to bor­row some­thing good from the reg­u­la­tory frame­work in the United States.”

The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion ear­lier planned to launch a new IPO plat­form called the strate­gic emerg­ing in­dus­tries board in late 2015, but ef­forts were halted amid sig­nif­i­cant stock mar­ket volatil­ity.

Mar­ket in­ter­est was reignited again after Pres­i­dent Xi Jin­ping an­nounced the plan to launch a new trad­ing plat­form on the Shang­hai Stock Ex­change dur­ing the China In­ter­na­tional Im­port Expo held in Shang­hai ear­lier this month. Qual­i­fied com­pa­nies will be able to seek list­ings through a much more ef­fi­cient reg­is­tra­tion sys­tem than that which cur­rently gov­erns IPOs in China.

“The first batch of com­pa­nies are ex­pected to be com­pa­nies that have ap­pointed an in­vest­ment banker and started to pre­pare for a list­ing. They might fo­cus on five ma­jor fields in­clud­ing in­te­grated cir­cuits, ar­ti­fi­cial in­tel­li­gence, bio­med­i­cine, aero­space and new en­ergy ve­hi­cles,” wrote an­a­lysts with Citic Se­cu­ri­ties.

Some lo­cal gov­ern­ments have started to col­lect names of qual­i­fied can­di­dates, set­ting high thresh­olds. Ac­cord­ing to a doc­u­ment from the fi­nan­cial ser­vices of­fice of Wuxi, Jiangsu prov­ince, com­pa­nies worth over a hun­dred mil­lion yuan ($14.4 mil­lion) and hav­ing pos­i­tive net prof­its will be qual­i­fied to be on the list for fur­ther con­sid­er­a­tion.

Shen Meng, direc­tor of bou­tique in­vest­ment bank Chan­son & Co, said po­si­tion­ing is key. The new plan should be­come an ef­fi­cient way for high- qual­ity firms to raise funds and bring over­seas-listed Chi­nese high growth and in­no­va­tive com­pa­nies back to raise funds in the do­mes­tic mar­ket.

Many tech­nol­ogy star­tups and in­ter­net gi­ants have adopted the so-called vari­able in­ter­est en­tity struc­ture to raise funds, as they have dif­fi­culty meet­ing prof­itabil­ity re­quire­ments to list on the A-share mar­ket.

Con­tact the writ­ers at wangyan­[email protected]­nadaily.com.cn

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