At the end of the year and the beginning of the year, the withdrawal of IPO began again.
In January 2022, three IPOs have applied for withdrawal of materials, including two gem projects and one science and innovation board project. Recently, there has been a wave of IPO termination. In December 2021, 28 IPOs terminated their listing, close to the high level in March of the same year.
according to the analysis of insiders, with the end of 2021, some IPO companies may have a sharp decline in their annual performance due to poor operation, so they withdraw their materials. Some withdraw their listing applications because of compliance defects and inconsistent plate positioning.
Looking back on 2021, 242 IPO companies have terminated, of which the number of projects terminated in the registration process has increased significantly, a total of 16.
The number of IPO terminations increased in December
The data show that the termination of IPO increased again in December 2021. According to the statistics of the securities times, a total of 28 IPOs were terminated in December 2021. The last round of IPO withdrawal occurred in February and March 2021. At that time, the deterrence of on-site inspection and the strict investigation of surprise shares by regulators made market participants cautious, and the number of IPOs withdrawn in a single month was more than 30.
Specifically, in December 2021, there were 16 IPO terminations on GEM, accounting for 57%; There are 8 and 4 terminations on the science and technology innovation board and the Shanghai and Shenzhen main board respectively.
From the data of previous years, the number of terminated IPOs in December was also at a high level. In December 2020, there were 29 IPO terminated IPOs on the science and innovation board and the gem alone.
Why is the withdrawal of materials concentrated at the end of each year? In this regard, a person from the IPO project team in South China explained to the securities times, “although the annual audit data did not come out so quickly, the overall business situation has been relatively clear at the end of the year. Some projects withdraw materials because of a sharp decline in business performance. Others are drawn to on-site supervision.”
Baodai, a large securities firm in East China, also has a similar view. He said that some companies to be listed take the initiative to withdraw materials because the annual data are less than expected, the net profit may be less than 50 million, and the company may have other defects; There are also some IPO companies because they do not meet the plate positioning. At present, the science and Innovation Board emphasizes the attribute of science and innovation, and the gem is also talking about “three innovations and four innovations”.
In 2021, a total of 242 IPO companies terminated their listing from Shanghai and Shenzhen main board, science and innovation board and gem. It is worth noting that 16 IPO companies were terminated in the registration process, exceeding the sum of 2019 and 2020.
From the industry attribute of terminated enterprises, taking the registration system projects as the statistical sample, the reporter of the Securities Times noted that the number of terminated projects in the “computer, communication and other electronic equipment manufacturing industry” was the largest, accounting for about 17%. “Special equipment manufacturing” ranked second, accounting for about 14%. “Chemical raw materials and chemical products manufacturing industry” ranked third, accounting for about 9%. In addition, software and information technology services, pharmaceutical manufacturing, electrical machinery and equipment manufacturing accounted for more than 5%.
The exchange shall establish a random supervision mechanism
accordingly, the withdrawal of IPO projects by relevant sponsors has attracted more and more market attention.
According to the statistics of Chinese journalists of securities companies, the number of IPO projects terminated in Citic Securities Company Limited(600030) in 2021 is the largest, with a total of 22, including 11 on the science and innovation board.
17 and 15 IPO projects of Huatai united and Minsheng securities were terminated respectively. Both China Securities Co.Ltd(601066) and Guotai Junan Securities Co.Ltd(601211) have 14. There are 13 Haitong Securities Company Limited(600837) and 13 Sinolink Securities Co.Ltd(600109) respectively. There are 12 Guosen Securities Co.Ltd(002736) and 10 China International Capital Corporation Limited(601995) and China Merchants Securities Co.Ltd(600999) respectively.
However, due to the large number of projects declared by large recommendation institutions, the number of terminated enterprises actually accounts for a small proportion, which has a limited impact on large securities companies.
It is relatively difficult for small securities companies. According to the statistics of Chinese journalists from securities companies, as of November 23, Wanhe securities had a high failure rate, reaching 83%. As a securities firm with state-owned assets background in Shenzhen, there are only five queuing projects of Wanhe securities on the gem, of which three are terminated and another one is terminated in the registration process, mainly because the issuer’s financial information has expired and has not been updated for 3 months, and only one is in the inquiry stage. The sponsor had no projects on the science and innovation board and had a single IPO project on the main board of Shanghai and Shenzhen, but failed to impact the listing in December 2021 and was not approved by the issuance and examination committee.
In addition to the project of Beijing stock exchange, Northeast Securities Co.Ltd(000686) IPO project also has a failure rate of more than 50%, which is 57%. According to the data, Northeast Securities Co.Ltd(000686) in 2021, two gem projects were successfully listed, and another four gem IPO projects were terminated; There is no project on the scientific innovation board; There is one project under review on Shenzhen main board.
It is worth mentioning that in 2021, the regulatory authorities adopted a strict regulatory posture for the projects of “one supervision and one withdrawal”. In July 2021, the CSRC issued the guidance on urging securities companies to be responsible for investment banking business under the registration system, which mentioned that it is necessary to further expand the on-site inspection and supervision, adhere to the principle of “reporting is responsible”, and the CSRC and trading places will organize the inspection of the items withdrawn after receiving the on-site inspection or supervision notice according to law.
The CSRC also said that it is necessary to establish a standing book on violations of investment banking business, and organize special inspections at least once a year for securities companies with high withdrawal rate of investment banking projects, high default rate of corporate bonds, low evaluation of practice quality and many problems reflected by the market.
Some investment bankers from securities companies told Chinese reporters that this move mainly reflects the determination of regulators to eliminate “breaking through customs with diseases” and requires sponsors to be more cautious in reporting projects.
according to the Chinese reporter from the securities firm, the Shenzhen Stock Exchange explored and established a random supervision mechanism for initial projects in the fourth quarter of 2021. In October, one gem initial project under review was randomly selected for on-site supervision for the two sponsors who were disciplined by the Shenzhen Stock Exchange and had a high proportion of projects withdrawn or rejected.
According to the latest issue of audit dynamics of gem registration system issuance and listing, Shenzhen Stock Exchange implemented on-site supervision on two randomly selected initial projects in November 2021. The contents of random supervision and problem-oriented supervision have their own emphases. They mainly check the establishment of the internal system of the sponsor’s recommendation business, the performance of the “three lines of defense” of the investment banking business and the implementation of the system, and check whether the documents and verification opinions issued by the sponsor are supported by sufficient evidence in combination with the selected projects.
(source: China Securities Company)
