Tightening IPO reviews by China’s securities watchdog will have profound impacts on domestic venture capitals (VC) and private equity (PE) firms, according to a report by the China Securities Journal today.
The IPO approval rate in China hit its lowest for a weekly record in its history last Friday, standing at a mere 16.7%. Of the 18 applicants, only three received a green light.
During the IPO reviews by the China Securities Regulatory Commission (CSRC) on Tuesday, Wednesday, and Friday last week, only one approval was granted each day.
The vetoes by the CSRC were given primarily for connected transactions, unstable business performances, and inconsistent information disclosures.
As of Friday, this year the CSRC has vetted IPO applications from 45 companies. Among them, only a third have obtained its approval.
Such stringent review practices will put pressure on many venture capital companies, private equity firms, and securities dealers.
“Rejected IPO applications will drive up the exit costs for venture capital companies and private equity firms, which may have intended to wait for one or two years before completing their exits on the secondary market. Preparation for another application will take half a year or even one year, thus incurring additional costs and cutting their profits,” said an investor in Beijing.
Compared to other exit strategies such as listing on the “new third board” stock market, equity transfer, and mergers and acquisitions, the IPO is the most important one for venture capital companies, private equity firms, and securities dealers in China.
Track record is crucial for venture capitals and private equity firms in their fund-raising efforts, to which a rejected IPO application will bring negative impacts, said the above investor.
The rigorous IPO review will continue in the future to cover every aspect of the applicants’ business records, of which only those sound enough can get listed on the stock market. The period of “leaps” for private equity firms is already gone, and various loopholes for listed companies will be effectively closed, said Mr. Qiu Jiantang, a domestic investor.
The IPO approval rate in China hit its lowest for a weekly record in its history last Friday, standing at a mere 16.7%. Of the 18 applicants, only three received a green light.
During the IPO reviews by the China Securities Regulatory Commission (CSRC) on Tuesday, Wednesday, and Friday last week, only one approval was granted each day.
The vetoes by the CSRC were given primarily for connected transactions, unstable business performances, and inconsistent information disclosures.
As of Friday, this year the CSRC has vetted IPO applications from 45 companies. Among them, only a third have obtained its approval.
Such stringent review practices will put pressure on many venture capital companies, private equity firms, and securities dealers.
“Rejected IPO applications will drive up the exit costs for venture capital companies and private equity firms, which may have intended to wait for one or two years before completing their exits on the secondary market. Preparation for another application will take half a year or even one year, thus incurring additional costs and cutting their profits,” said an investor in Beijing.
Compared to other exit strategies such as listing on the “new third board” stock market, equity transfer, and mergers and acquisitions, the IPO is the most important one for venture capital companies, private equity firms, and securities dealers in China.
Track record is crucial for venture capitals and private equity firms in their fund-raising efforts, to which a rejected IPO application will bring negative impacts, said the above investor.
The rigorous IPO review will continue in the future to cover every aspect of the applicants’ business records, of which only those sound enough can get listed on the stock market. The period of “leaps” for private equity firms is already gone, and various loopholes for listed companies will be effectively closed, said Mr. Qiu Jiantang, a domestic investor.
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