PE-backed firms win approval for China listings
Five Chinese companies – at least two of which have private equity or venture capital backers – have won approval to list on mainland stock exchanges as the year-long IPO lockdown comes to a close.
Neway Valve, the country's largest exporter of industrial valves, will list on the main board of the Shanghai Stock Exchange. According to AVCJ Research, investors including Suzhou International Development Venture Capital committed RMB234 million ($38.7 million) to the company in 2009.
Zhejiang Wolwo Phama, which received RMB20 million from Orica Capital, Shanghai Lehel Capital and Shenzhen Oriental Fortune Capital (OFC), plans to list on the Shenzhen GEM board.
The other companies to win approval are Truking Technology, Guangdong Qtong Education and Guangdong Xinbao Electrical Appliances Holdings. They will all go public in Shenzhen, Reuters reported.
When the China Security Regulatory Commission (CSRC) announced in December that the IPO markets would re-open, it said there were more than 760 companies with listing applications pending and a full year would be required to audit each one. About 50 companies are expected to make up the first batch of listings.
According to Ernst & Young, this initial group could raise around 40 billion, while fundraising could reach RMB200 billion for 2014 as a whole.
Approvals of new listings started to slow from the middle of 2012 before coming to a complete halt by the end of the year. Denied information as to when they might resume, many PE firms - keen to return capital to investors who were promised their money back, plus a handsome return, within three years - grew restless. Fundraising slowed as a result.
Last month the CSRC unveiled a long-awaited IPO reform plan, advocating a market-driven system to help boost market transparency. This includes the adoption of a registration-based system for IPOs in place of the current approval-based system.
Under the registration system, the regulator will limit its influence in approving the IPO applications, while IPO sponsors, law and accounting firms will bear more responsibility for ensuring listing candidates' financial information is accurately disclosed. Listing candidates will therefore be required to submit prospectuses and disclose financial documents earlier, allowing the regulator and investors sufficient time for review.
Where sponsor or advisor negligence is judged to have contributed to a serious loss for investors, they will have to compensate those investors.
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