China’s third-quarter IPOs decline amid efforts by regulator to tighten the pace of fundraising

There were 91 listings worth 114 billion yuan (US$15.8 billion) recorded in the third quarter, down from 105 listings worth 144.6 billion yuan in the previous quarter, according to reports by local news outlets.

In the first nine months of the year, a total of 264 new share listings in mainland China raised 323.6 billion yuan, which marked a 0.33 per cent decline from the number of IPOs in the same period in 2022.

Shanghai’s Nasdaq-style Star market was the mainland’s top IPO venue during the past three quarters, with a total of 139.6 billion yuan raised. It was followed by Shenzhen’s start-up-focused ChiNext Market, which raised 112 billion yuan.
The Shanghai Stock Exchange’s tech-focused Star Market was the main venue for initial public offering activities in mainland China during the past three quarters of this year. Photo: Reuters

Shanghai’s main board, meanwhile, raised a total of 39.6 billion yuan in the same period, compared to 21.4 billion yuan in Shenzhen and 11.1 billion yuan in Beijing.

The IPO slowdown last quarter has come amid a slew of measures issued by regulatory authorities to boost the country’s capital markets. These initiatives include reducing trading and transaction costs, improving the liquidity of the Beijing Stock Exchange, and restricting the ability of loss-making listed companies to pursue refinancing deals.

The third quarter also saw a total of 74 IPO withdrawals. That number made up 40 per cent of the 184 IPO withdrawals recorded in the first nine months of the year.

The headquarters of Dezhou Braised Chicken, a meat producer and retailer based in the eastern coastal province of Shandong. Photo: Handout

Of the 74 withdrawn share listings, 12 were in the consumption goods category. These included popular brands such as Dezhou Braised Chicken, a meat producer and retailer based in the eastern coastal province of Shandong.

The IPO withdrawals came on the heels of rules issued by the China Securities Regulatory Commission (CSRC) to tighten the pace of new share sales and limit the number of local companies in certain sectors from going public. That action was meant to channel funding into more strategic hi-tech industries, such as semiconductors and biotech.

In January, the country’s securities watchdog gave companies in the food-and-beverage sector and Covid-19-testing segment a “red light” status, which barred these firms from gaining access to equity financing in the Shanghai and Shenzhen stock exchanges.

China’s tech, media and telecoms IPOs fall in first half of 2023: PwC report

The regulator also identified several “yellow light” industries – including apparel, home appliances and furniture – that meant major companies in these areas could be considered for an IPO. Meanwhile, companies that require heavy debt financing to expand would be under close scrutiny.

Since Beijing rolled out a new registration-based IPO system in February this year, a total of 18 companies in the consumption goods category have withdrawn their listing applications in Shanghai and Shenzhen.

More than 20 food-and-beverage and apparel-related companies are currently waiting for their IPO applications to be approved, following the implementation of the new registration-based system. This set-up gave stock exchanges the power to vet IPO plans instead of the CSRC.

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