Securities Times reporter Wang Jun
Recently, the Shenzhen Stock Exchange officially announced the decision to terminate the review of Jiangtong copper foil's listing on the GEM.
It is not surprising that Jiangtong Copper Foil withdrew its IPO application. On June 5 this year, Jiangxi Copper issued an announcement that it would terminate the spin-off of its holding subsidiary, Jiangtong Copper Foil, to be listed on the GEM. The reporter found that in the context of the phased tightening of IPO and refinancing, since the beginning of this year, 17 A-share companies have terminated their spin-offs and listings.
The market cooled
Since the implementation of the new rules on spin-offs and listings at the end of 2019, the A-share market has set off a boom in spin-offs and listings, but with the changes in the market environment, the popularity of spin-offs and listings has continued to decline. Recently, four A-share listed companies, including Baosteel, Jingsheng Electromechanical, Hisense Video, and Huahai Pharmaceutical, have disclosed announcements to terminate their spin-off and listing plans.
It is reported that Baosteel originally planned to spin off its subsidiary Baowu Carbon Technology Co., Ltd. (hereinafter referred to as "Baowu Carbon") to be listed on the GEM. According to public information, Baowu Carbon is mainly engaged in the research and development, production and sales of tar refined products, benzene refined products and carbon-based new materials, as well as coke oven gas purification services. From 2020 to 2022, Baowu Carbon achieved operating income of 5.720 billion yuan, 10.631 billion yuan, and 15.287 billion yuan respectively, and net profit attributable to the parent company of 49 million yuan, 373 million yuan, and 378 million yuan respectively.
Jingsheng Electromechanical originally planned to spin off its subsidiary Zhejiang Meijing New Materials Co., Ltd. (hereinafter referred to as "Meijing New Materials") to be listed on the Growth Enterprise Market of the Shenzhen Stock Exchange, Hisense Video originally planned to spin off its subsidiary Qingdao Xinxin Microelectronics Technology Co., Ltd. (hereinafter referred to as "Xinxin Microelectronics") to be listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange, and Huahai Pharmaceutical originally planned to spin off its subsidiary Changxing Pharmaceutical Co., Ltd. (hereinafter referred to as "Changxing Pharmaceutical") to be listed on the Beijing Stock Exchange, but the above companies eventually terminated their spin-off and listing plans.
According to incomplete statistics from the Securities Times reporter, since the beginning of this year, there have been 17 cases of spin-off and listing "folding". In addition to the above four companies, there are 13 listed companies such as Topband, Jingda, Wall Nuclear Materials, SAIC, Weichai Power, Chenguang Biotechnology, Electronic City, Zhengmei Machinery, Keda Manufacturing, Han's Laser, Wolong Electric Drive, Goertek, and Jiangxi Copper this year.
Among them, Jingsheng Electromechanical, Baosteel, Han's Laser and other 8 companies originally planned to spin off their subsidiaries to be listed on the GEM, Hisense Video, Zhengmei Machinery, and SAIC Group 3 companies originally planned to spin off their subsidiaries to be listed on the Science and Technology Innovation Board, Wolong Electric Drive originally planned to spin off their subsidiaries to be listed on the main board of the Shenzhen Stock Exchange, and 4 companies including Jingda Co., Ltd., Chenguang Biotechnology, Electronic City, and Huahai Pharmaceutical originally planned to spin off their subsidiaries to be listed on the Beijing Stock Exchange, and Keda Manufacturing did not clarify the specific plate of the spin-off and listing.
It is worth noting that among the above-mentioned spin-off and listed subsidiaries, Goertek, Jiangtong Copper Foil, Baowu Carbon, etc. have passed the deliberation of the listing committee meeting, but ultimately failed to land in the capital market.
Strong regulation is coming
At present, the popularity of spin-offs and listings has plummeted, and some companies have voluntarily abandoned IPOs based on changes in the market environment and their own business strategy considerations, while some companies may passively choose to abandon IPOs under the background of current strict supervision.
In the announcement of the listed company, a number of companies stated that based on the current market environment and the subsidiary's own development plan and other factors, after full communication and prudent argumentation with relevant parties, the company intends to terminate the spin-off of the subsidiary.
"The obvious cooling of the phenomenon of spin-offs and listings is the result of the combined effect of stricter supervision of the capital market and changes in the market environment." Chen Xingwen, chief strategy officer of Blacksaki Capital, told the Securities Times that with the slowdown in economic growth, some industries are facing downward pressure, and the performance of some subsidiaries that were originally planned to be spun off and listed has fluctuated and no longer meets the listing conditions.
At the same time, strict supervision has also forced listed companies to spin off and list more rationally. On April 12, the State Council officially issued the "Several Opinions on Strengthening Supervision and Preventing Risks and Promoting the High-quality Development of the Capital Market", which clearly proposes to "strictly supervise spin-off listings" under the item of "further improving the issuance and listing system".
"Since the beginning of this year, with the comprehensive strengthening of the strict supervision and accountability system of the whole process of new share issuance, the strict supervision of the access gate, the continuous release of the signal of strict supervision of IPOs, and the change of market environment factors are the main reasons for the current listed companies to terminate the spin-off and listing of subsidiaries." Yao Xusheng, a wealth financial planner at Paipai.com, said in an interview with a reporter from the Securities Times.
Listed companies choose to spin off to A-share listing, mainly to rationalize their business structure, broaden financing channels, obtain reasonable valuations, and enhance their overall competitiveness. Yao Xusheng believes that through spin-off and listing, the subsidiary has achieved direct docking with the capital market, which can achieve the purpose of improving the financing ability of the enterprise, standardizing the operation and governance, and reducing the management cost of the entire listed company system.
First of all, the spin-off can directly increase the financial resources required for the development of the subsidiary, which is conducive to enhancing the competitiveness of the subsidiary's R&D, production and sales, and reducing the capital demand for the parent company. Secondly, the spin-off can form an incentive for the management of the subsidiary, the operation and management of the subsidiary will be more active, and the good development of its business will also have a positive effect on the financial of the listed company. Third, spin-offs can revaluate the value of the subsidiary's business, so that investors can have a better understanding of part of the listed company's business. Finally, due to the strong business independence between subsidiaries and listed companies, the spin-off and listing of subsidiaries is conducive to the formation of sound functional departments and internal operation and management institutions, reducing the management pressure of listed companies, and helping listed companies focus on their core business development.
However, how to really become bigger and stronger after the spin-off and listing, and form its own competitive advantage, test the core strength of the parent and subsidiary. CICC has pointed out that in addition to the many benefits that spin-offs can bring, spin-offs often bring certain risks or arbitrage opportunities in practice, which is also the key point to distinguish when setting up the regulatory framework and reviewing projects.
According to CICC's view, since the parent company still retains control over the subsidiary after the spin-off, whether the operation of the parent and subsidiary can be completely independent is also the focus of regulatory verification. On the one hand, whether a subsidiary can achieve independent development and operation from the parent company is an important factor in whether it can be recognized by investors in the capital market as an issuer. On the other hand, if the operation, decision-making and personnel of the company are not completely isolated, it may induce unfair related party transactions, benefit transfer, profit transfer, debt evasion and other problems, and damage the interests of small and medium-sized investors.
Find new paths
After being listed on the Shanghai and Shenzhen Stock Exchanges, some companies are looking for a new path and choosing to be listed on the Beijing Stock Exchange or the New Third Board.
For example, after announcing the termination of the spin-off subsidiary to be listed on the main board of the Shenzhen Stock Exchange, Wolong Electric Drive turned its attention to the New Third Board. On May 10, Longneng Power was listed on the national small and medium-sized enterprise share transfer system for public transfer. On May 16, Longneng Power announced that the company has submitted an application to the Zhejiang Securities Regulatory Bureau for the guidance and filing of the change of the listing sector, and the company will change the plan of initial public offering of shares and listing on the main board of the Shenzhen Stock Exchange to a public offering of shares to unspecified qualified investors and listing on the Beijing Stock Exchange based on its own development plan and other factors.
Yuan Huaming, general manager of Huahui Chuangfu Investment, pointed out in an interview with a reporter from the Securities Times: "The influence and liquidity conditions of the Beijing Stock Exchange and the New Third Board are worse than those of the main board, and the spin-off subsidiaries are less difficult to list on the Beijing Stock Exchange or the New Third Board than the main board, which should be the main reason for some listed companies to change their routes." ”
Compared with the A-share main board and the GEM, the Beijing Stock Exchange and the New Third Board have a relatively low listing threshold and a shorter review cycle, which is a feasible financing path for some small enterprises that are still in the growth stage. Chen Xingwen believes that some companies have turned to seek to be listed on the Beijing Stock Exchange or the New Third Board after announcing the termination of the A-share listing of spin-off subsidiaries, which reflects the multi-level and diversified needs of enterprises in the capital market.
From the perspective of the industries to which the spin-off subsidiaries belong, they are mainly concentrated in strategic emerging tracks such as high-end equipment manufacturing industry, new material industry, and new generation information technology industry. Yao Xusheng believes that the listing of popular emerging tracks is conducive to better serving scientific and technological innovation and high-quality economic development. With the gradual increase in the number of diversified companies in the A-share market and the gradual maturity of the market trading and regulatory environment, spin-offs and listings will become an important means of resource allocation and asset restructuring.