China IPO promised land turns to desert as regulator review stokes confusion

Sun Apr 20, 2014 5:19pm EDT
 
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By Natalie Thomas and Pete Sweeney

SHANGHAI (Reuters) - Dozens of Chinese companies have abandoned plans to list in the mainland this year, as confusion reigns among executives, bankers and investors over an opaque regulatory review that's clouding what was touted as a banner year for new stock debuts.

As China Securities Regulatory Commission (CSRC) orders underwriters to update application materials once again, there have been no new China listing applications published for the past eight weeks. Sources at investment banks say many firms that once planned initial public offerings have given up as they wait for the CSRC to explain exactly what its listing requirements will be after publishing 16 different sets of guidelines in the last six months.

With little visibility on how the CSRC will proceed, or which companies might be approved to list, the next IPO isn't likely before the start of May at the earliest.

The slow pace is a setback for investment bankers and underwriters who had hoped the relaunch of IPOs in China in 2014 would unlock around $40 billion worth of new issuance, bringing profits after a 14-month freeze from late 2012 when the regulator effectively halted new listings. It's also bad news for hundreds of companies who have been waiting, for years in many cases, to tap stock markets for funds.

"In terms of a time frame I think it (the next listing) will be the middle of the year," said Du Changchun, an analyst at Northeast Securities in Shanghai. "It won't happen very quickly because of the reforms and then the annual earnings reports, and once these have concluded then these companies might have to give some supplementary materials like quarterly or annual reports."

Since the year began, more than 24 companies have shelved applications to list, according to CSRC data released in April.

Last week's move by the CSRC to seek updated documentation at least countered swirling local media reports of another IPO lockdown as the regulator seeks to raise the quality of companies listing on the Shanghai or Shenzhen exchanges.

CITIC Securities said in a report last week that the move meant the approval process was starting earlier than predicted, and it anticipates the first listing could start at the beginning of May.   Continued...