“I only thought the tide would rush, but I didn’t expect the whole ecology to change.” Looking back on the implementation of the new refinancing regulations for two years, a senior investment bank head sighed.
On February 14, 2020, the CSRC issued new refinancing regulations to relax the determination of issuance price, issuance scale and reduction restrictions. As the official draft is further relaxed in the use rules of “new and old division” and refinancing scale compared with the exposure draft, once released, the industry exclaimed that it was “beyond expectations”, which is expected to activate the market and quickly become a “consensus”, and more people in the industry shouted the heroic words of “refinancing scale returns to trillion”.
Now, two years have passed, and earth shaking changes have taken place in the A-share fixed growth market – the financing scale has resumed its upward trend and the market heat has improved significantly. These changes are only appearances. Driven by the new refinancing regulations, the operation mechanism of the fixed value-added market has realized the transition from the approval system of “only the approval documents follow the lead” to the registration system of “market spontaneous choice”. This is a milestone in the history of A-Shares and complements the ongoing reform of IPO registration system.
opening the gate: from longing for trillions to rational face
As one of the most important functions of the capital market, A-share refinancing, especially equity refinancing, has always been concerned by all parties involved in the market. When the new refinancing rules were issued two years ago, they were regarded as a “great deregulation” of refinancing of listed companies due to the design of “adjusting the pricing and locking mechanism of non-public offering”, “relaxing the discount rate of refinancing issue price”, “significantly shortening the holding lock period and not applicable to the relevant restrictions of the reduction rules”.
Looking back on the development history of the fixed value-added market, the fixed value-added market has become more and more popular since 2014, breaking the trillion yuan mark in 2015, and then continued to be hot in 2016 and 2017. In 2017, the CSRC adjusted the refinancing rules, resulting in the cooling of the market. In 2018 and 2019, the fixed growth market fell back to 786.398 billion yuan and 668.629 billion yuan.
In this context, the introduction of new refinancing regulations is highly expected by the market. At that time, some investors said frankly that the new regulations would activate the market and the fixed growth scale would return to trillion yuan, which is worth looking forward to.
From the implementation effect, the new refinancing regulations have indeed activated the market. Just one week after the release of the new regulations, about 90 A-share companies launched, revised or planned refinancing plans with reference to the new regulations. In the week before the release of the new regulations, the data was only single digits. Before and after comparison, the expansion range was nearly 10 times.
This enthusiasm continues to this day. In 2020 and 2021, the number of companies implementing fixed growth of A-Shares was 400 and 503 respectively, far exceeding the average annual level of more than 200 in 2018 and 2019. In terms of fund-raising scale, the data in 2020 and 2021 are 846.551 billion yuan and 876.326 billion yuan respectively.
Just looking at the scale of fund-raising, the new refinancing regulations did not seem to “meet expectations” and did not reach trillion yuan. However, the reporter of Shanghai Securities News found that the mentality of investment banks and investment institutions towards the “trillion scale” is also changing – from expectation to rationality, from attention to forgetting. Especially in 2021, few people mentioned the scale of the fixed growth market.
Why is there such a change? “It doesn’t matter whether the annual financing scale of the whole market can reach trillion yuan. As long as good companies can get more financing, poor companies can’t get more financing even at low prices. The distinction between good and bad is decided by investors spontaneously, which realizes the survival of the fittest, improves the resource allocation efficiency of the A-share market and better serves the real economy.” Senior insiders said.
dredging: the fixed growth market has entered a virtuous circle
No longer focus on the whole, but on the individual; No longer superstitious approval, but focus on the market; No longer clinging to arbitrage, but focusing on the industry… These things that have not happened in the fixed growth market for many years have become a common phenomenon in the market in the past two years.
“The key to the success of fixed growth is not whether the regulatory approval is approved, but whether the market recognizes it.” The senior investment bank official told reporters.
This change is the effectiveness of the new refinancing regulations. In February 2020, after the introduction of the new refinancing regulations, the relevant provisions of the market price fixed increase were clarified, and in the subsequent implementation process, the listed companies and market institutions were continuously guided to adopt the market price fixed increase scheme. From the audit rhythm, the audit efficiency of market price fixed increase is very high. The process can be completed in just three or four months, and the rejection rate is significantly lower than that before. In addition, the lock price increase, once regarded as an “arbitrage opportunity”, has been gradually marginalized due to the recognition of war investment standards.
“Now the fixed value-added market has entered a virtuous circle. The treatment corresponding to the quality of the project varies greatly, and different investors also face different markets, which we are willing to see.” Said an investor who deeply cultivated the fixed growth market.
The investor explained that there is a “clear distinction” between the fixed increase of lock price and the fixed increase of market price – investors with short holding period connect with companies with short-term financing needs to speed up the rhythm and efficiency of this market; Companies seeking to obtain long-term funds connect with funds with Industrial Synergy to avoid simple and crude institutional arbitrage.
“The regulatory review of fixed increase, especially the fixed increase of market price, obviously tends to be procedural, so that most schemes have the opportunity to be put in the market for investors to choose. When there are enough projects, the funds will think about which projects can be invested and which can not.” The senior investment bank official told reporters.
For this reason, today’s fixed growth market presents a picture of ice and fire. On the “fire” side, head companies can increase at a premium or even select institutions; At the end of the “ice”, a large number of small and medium-sized companies have difficulty in raising funds. They can’t find investment institutions with approval in hand. It’s common to see insufficient fund-raising and even invalid approval.
rush: from group Carnival to winner take all
As an important means of financing in the capital market, every rise of refinancing tide reflects the market style at that time. This time, the strength of the market makes the style particularly obvious.
“The new regulations on refinancing make the idea of marketization deeply rooted in the hearts of the people – the market determines which companies can get money. The arbitrage space is eliminated. Instead of focusing on the price difference and term, we focus on the listed companies themselves and look at fixed growth with industrial logic. If there are prospects for development, we should also try if the price is higher; if there are no prospects for development, we should not look at the price if it is lower.” The above investors said.
The industrial logic of fixed growth naturally comes from industrial changes in the economy. Over the past two years, there have been constant sources of fixed and increased resources, and the fast-growing new economy and Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) have benefited the most. Among these fixed growth plans, listed companies in emerging industries represented by new energy and semiconductors have the most eye-catching performance, with large-scale financing emerging one after another. The fields of fund-raising and investment are at the forefront of the industry, with more advanced core technologies and broad development prospects.
“It is the general trend to use refinancing to enhance the strength of science and innovation. The A-share market has formed an upsurge of supporting and pursuing science and innovation, which will help the development of relevant emerging industries.” An investment banker who pays attention to the field of science and technology said.
For example, the new energy leading Contemporary Amperex Technology Co.Limited(300750) completed a 19 billion 700 million yuan increase in July 2020, and launched a new round of fixed increase plan in August 2021. It is estimated that the fund-raising amount will be as high as 58 billion 200 million yuan, and then adjusted to 45 billion yuan. At present, the scheme has been approved by the audit.
In the past, those who participated in the collective investment and arbitrage system are often good at increasing the price of resources, which depends on the system of collective investment and arbitrage. Now, the fixed growth market entering the “registration system time” has been a winner take all – leading companies are relatively easy to get money. After getting the money, they can get more development space and occupy a larger market share, which can be described as “win step by step”.
“Looking for leading companies with a voice in industries with broad development prospects is the main line of our participation in fixed growth. They are the trendsetters of the times, and we naturally want to be with them.” The investor told reporters.
