New changes under the comprehensive registration system: if the delisting channels are not opened up and strengthened, a dammed lake will be formed

The comprehensive registration system is a "bull's nose" project to deepen the reform of the capital market, a key measure for the development of direct financing, and a major reform to improve the system and mechanism of market-oriented allocation of factors

Editor's note: A year ago, shortly after the Spring Festival of the Year of the Rabbit, the overall plan for the comprehensive registration system and the draft of relevant system rules were officially released, and three months later, the first batch of 10 companies under the main board registration system were officially listed, announcing that China's capital market has entered the era of the full registration system.

The registration-based reform is an important milestone in China's capital market, which was first proposed in 2013, officially entered the implementation stage in November 2018 after twists and turns, was piloted on the Science and Technology Innovation Board in 2019, and expanded to the Growth Enterprise Market and the Beijing Stock Exchange in 2020 and 2021 respectively.

In the past, Reading Yiqi focused on the promotion process of the registration system reform, and conducted in-depth interviews and objective presentations on system changes, market impacts, and practical challenges. On the occasion of bidding farewell to the old and welcoming the new, we will revisit the major event in the capital market - the reform of the registration system.

文 | 张欣培 王颖 郭楠 黄慧玲 冯奕莹

Edit | Yang Xiuhong, Lu Ling

China's capital market is undergoing one of the most important reforms in the past 30 years. On February 17, 2023, the full registration system was officially implemented.

On the same day, the China Securities Regulatory Commission and the stock exchange issued rules for the full implementation of the registration-based system for stock issuance. A total of 165 institutional rules were issued this time, including 57 institutional rules issued by the China Securities Regulatory Commission and 108 supporting institutional rules issued by the stock exchange, the National Equities Exchange and Quotations Corporation, and China Clearing. Its main contents include streamlining and optimizing the conditions for issuance and listing, improving the review and registration procedures, optimizing the issuance and underwriting system, improving the major asset restructuring system of listed companies, and strengthening regulatory law enforcement and investor protection.

The full implementation of the registration system is a major reform involving the overall situation of the capital market. "The promulgation and implementation of the rules for the full implementation of the registration-based system marks the basic finalization of the institutional arrangements of the registration-based system, and marks the promotion of the registration-based system to the whole market and all kinds of public offerings, which is a milestone in the reform and development process of China's capital market. The SFC said.

In the view of Wu Xiaoqiu, former vice president of Chinese Renmin University, the reform of the registration system, the establishment of the Shanghai and Shenzhen stock exchanges, and the reform of equity division are the three monuments of China's capital market.

Liu Jianjun, a professor at the School of Finance and Statistics of Hunan University, told Caijing: "Compared with the previous approval system, the registration system has three major institutional advantages: first, the issuance conditions have been greatly optimized, and the predictability has been significantly improved; second, the choice is handed over to the market, highlighting the decisive role of the market in the allocation of resources; third, the establishment of an operating mechanism with information disclosure as the core, which effectively restricts the behavior of market entities." ”

The comprehensive reform of the registration system will help China's economy achieve high-quality development.

"Through the reform of the registration system, we can enable the capital market to complete the construction of a resource allocation mechanism that supports high-quality development and is driven by innovation. China's economic development has entered a new stage, with some new characteristics and requirements, namely high-quality development and innovation-driven. Zhao Xijun, co-dean of the Capital Market Research Institute of Chinese University, told Caijing reporters. This major reform of the registration system will reshape the ecology of the capital market.

Under the full registration regime, the valuation system of A-shares will change.

At the working meeting, the China Securities Regulatory Commission proposed to explore the establishment of a valuation system with Chinese characteristics to better play the resource allocation function of the capital market.

Focusing on the essence of the registration-based reform that gives the choice to the market, regulatory reshaping continues to move forward. The reform of the registration system is a profound change involving regulatory concepts, regulatory systems, and regulatory methods. Liu Jipeng, dean of the Capital Finance Research Institute of China University of Political Science and Law, said that "separation of supervision and examination, decentralization of issuance and examination, real sponsorship, real supply and demand" is the top priority to resolve the contradictions in China's capital market system.

There are also opportunities and challenges for all players in the market. Some investment banks are gearing up to win incremental business in the new competitive landscape, while others in the industry believe that "whether each entity can truly exercise its own power and perform its responsibilities well will face greater challenges and tests in the implementation stage of the registration system." ”

The reform will not be achieved overnight, and the comprehensive registration system will still need to be continuously improved in the future.

"At present, the reform of the registration system is only an integral part of the market operation mechanism, and it also needs many supporting systems. For example, if we only implement a comprehensive registration system and do not open up and strengthen the delisting channels, a dammed lake will be formed. Liu Feng, chief economist of Galaxy Securities, believes.

Main plate reform

The main board has finally ushered in its own registration-based reform.

The number of listed companies on the main board and the number of investors are large, the scale of investment products is huge, and the relationship between interests is more complex. The reform of the registration system has always been considered to be difficult, challenging and risky, but it also has more important significance and role.

Therefore, the main board is the top priority of this reform. "The reform of the main board registration system is basically within everyone's expectations, and the most important point is to clarify the positioning of the main board. Wang Kai, a senior investment banker, said.

In terms of positioning, the reformed main board emphasizes highlighting the blue-chip characteristics of the large market, focusing on supporting high-quality enterprises with mature business models, stable operating performance, large scale, and industry representativeness/Visual China.

Correspondingly, the main board has also set up diverse and inclusive listing conditions. The reform comprehensively considers factors such as expected market capitalization, net profit, revenue, cash flow, etc., and sets up multiple sets of listing indicators such as "sustained profit", "estimated market value + revenue + cash flow" and "expected market value + income", cancels the requirements that there is no uncovered loss at the end of the latest period, and the restriction on the proportion of intangible assets in net assets is cancelled, and the threshold for enterprises to be issued and listed on the main board is optimized.

However, the main board has not relaxed its listing requirements for enterprises in the slightest, and it still has profit requirements for enterprises to be listed in the latest year. The STAR Market allows loss-making companies that meet the conditions to be listed. In contrast, motherboards are still the most demanding.

"Previously, when the Science and Technology Innovation Board and the Growth Enterprise Market implemented the registration system, the registration conditions were relaxed, but this time the main board implemented the registration system, and the registration conditions did not fall but rose, and there were higher requirements for profits, income or market value after listing. Chen Li, global chief strategy officer of Soochow Securities, told the "Caijing" reporter.

The "Caijing" reporter learned that some companies that planned to be on the main board have transferred to the GEM. "The requirements are higher, and I have to transfer, and there are more people who transfer to the GEM. However, some may not meet the requirements of the GEM 'three innovations and four innovations', so it is more embarrassing. Wang Kai told the "Caijing" reporter.

"Recently, it has been busy, and after the reform of the main board registration system, the application materials of some enterprises need to be readjusted according to the new regulations, which has increased the workload. A listed brokerage investment banker told the "Caijing" reporter.

Compared with the pre-reform period, the underwriting mechanism for initial public offerings on the main board has undergone three changes. First of all, in terms of pricing mechanism, it is clarified that the price and scale of new shares are mainly determined by market-oriented methods. For companies with smaller issuance scales, direct pricing will continue to be retained, and a new pricing reference cap will be added.

Second, in terms of subscription and placing, the subscription unit for new shares of online investors on the main board will be adjusted from 1,000 shares to 500 shares, which is consistent with the Science and Technology Innovation Board. According to the difference in the number of issuances, clarify the arrangement of the strategic placement scale and the number of participating investors.

Third, in terms of risk prevention and control, the implementation mechanism of the over-allotment option will be improved. A new response mechanism has been added in the event of major market changes, allowing issuers and lead underwriters to require offline investors to pay a certain amount of margin, and clarifying that investors can re-place if they abandon a large number of purchases.

The reform also improves the trading system of the Main Board. The specific measures include: first, there is no limit on the rise and fall of new shares in the first five trading days, and industry insiders believe that this move is conducive to promoting the return of new stock prices to reasonable value and improving the efficiency of market pricing; second, optimizing the intraday temporary suspension system; third, new shares can be included in margin financing and securities lending on the first day of listing, optimizing the refinancing mechanism, and expanding the scope of securities lending and borrowing sources.

However, the reform has not made any adjustments to the two systems: first, the daily rise and fall limit will continue to remain unchanged at 10% from the sixth trading day of the new listing, and second, the current investor suitability requirements of the main board will remain unchanged, and there will be no restrictions on investors' assets and investment experience.

In addition, the reform adds major institutional arrangements such as red chips and differential voting rights, improves the relevant information disclosure system, and forms unified and open regulatory standards. It is worth noting that the Shenzhen Stock Exchange has also made clear provisions on the application of unprofitable enterprises for listing on the GEM. The industry scope of unprofitable enterprises has been refined, and the listing conditions of unprofitable enterprises have been clarified.

After this reform, the multi-level capital market system will be clearer. After more than 30 years of reform and development, China's stock exchange market has gradually expanded from a single sector to a multi-level market, and each sector implements dislocation competition, basically covering enterprises in different industries, different types and different growth stages.

For example, the Science and Technology Innovation Board (STAR Market) highlights the characteristics of "hard technology", has key core technologies, and has outstanding scientific and technological innovation capabilities; the Growth Enterprise Market mainly serves growth-oriented innovative and entrepreneurial enterprises; and the Beijing Stock Exchange and the National Equities Exchange and Quotations System jointly build a main position for serving innovative small and medium-sized enterprises, focusing on supporting advanced manufacturing and modern service industries.

The China Securities Regulatory Commission said it would pay attention to whether the issuer is in line with the national industrial policy and sector positioning.

Valuation divergence

The promotion of the comprehensive registration system will reshape the valuation system of A-shares.

Since the reform of the registration-based system, the number of A-share listed companies has increased rapidly. The data shows that when the number of listed companies exceeded 1,000 and 2,000, it took ten years respectively. In September 2019, it exceeded 4,000 and lasted four years. But it only took three years to break through 5,000. This is due to the reform of the registration system in 2019, which has greatly improved the listing efficiency of enterprises.

However, with the rapid growth of the number of listed companies, the difficulty of listing has increased instead of decreasing.

One of the listing requirements of the GEM is that the operating income of the most recent year is not less than 50 million yuan, but the revenue level of successfully listed enterprises far exceeds this. According to Wind statistics, in the past two years, the revenue of companies listed on the GEM has been more than 100 million yuan in the past year.

At the same time, the queue of companies waiting to be listed is also very large. Wind data shows that as of February 16, there were 331 companies listed on the Growth Enterprise Market and 141 companies listed on the Science and Technology Innovation Board. Since 2023, the number of companies terminated (withdrawn/failed to pass the review) on the GEM has reached 16, and there are 4 on the STAR Market.

"Some companies withdraw, and some have communicated with the regulator in advance, and in order to be cautious, enterprises and intermediaries will make the choice of voluntary withdrawal. An investment banker said that the number of companies withdrawing the termination review will not be small.

According to the current pace of issuance, the number of A-share listed companies will soon exceed 6,000. Compared with overseas mature markets, the number of listed companies in the United States is only about 6,500.

"The U.S. capital market is very mature. The number of listed companies in China's A-share market is unlikely to exceed that of the United States. Even if it is now a full registration system, it will not be easy to go public. If the number of issuances of several hundred companies is maintained every year, the number of companies exiting will also be very large. A large brokerage investment banker in the south said.

Under the registration system, even if a company successfully enters the capital market, it may not have an outstanding performance in terms of stock price.

First of all, it may face the normalization of new stock breaks.

For issuance under the registration system, the previous issuance restriction of 23 times the price-earnings ratio has been abolished, and the market-oriented inquiry pricing method is adopted.

On February 17, the China Securities Regulatory Commission revised and promulgated the Administrative Measures for the Issuance and Underwriting of Securities, which came into force on the date of promulgation. There are no administrative restrictions on the price and size of new shares.

Chen Xianshun, chief equity strategy analyst of Bosera Fund, analyzed that after the reform of the registration system, the valuation level implied by the issue price will be closer to the pricing of the secondary market, "the space for new arbitrage has been greatly reduced, and the myth of steady profit and no loss is difficult to maintain, which is also the inevitable result of the market gradually becoming effective."

"After the full registration system of the main board, the pricing of new shares will be more market-oriented. It is still meaningful to participate in IPOs, and it is more necessary to test the pricing power of IPOs. IPO investment is both a risk and an opportunity, and doing a good job of fundamental research is still fundamental. Guohai Franklin Fund told the "Caijing" reporter.

In fact, in the Science and Technology Innovation Board, ChiNext and Beijing Stock Exchange, which have implemented the registration system, the phenomenon of new shares breaking has become more and more frequent. According to Wind statistics, as of February 16, the number of new shares breaking on the first day of listing has reached 126 since 2022. Earlier, in 2021, only 22 new stocks broke out.

Jones Lang LaSalle Greater China Chief Economist Pang Ming believes that the market is willing to give high-quality stocks a higher valuation level, and the "dividends" of high-quality stocks may exist for a long time and be further improved, while companies with poor fundamentals will have more difficulty obtaining excessively high pricing levels, and the differentiation effect and Matthew effect will become more obvious.

Second, post-listing stocks face trading differentiation in the secondary market.

Wind data shows that as of February 16, there were 136 A-share listed companies with a market value of more than 100 billion yuan, and the combined market value of these companies accounted for 41.5 percent of the total market value of A-shares. There are 152 listed companies with 50 billion yuan to 100 billion yuan, and 1,309 companies with 10 billion yuan to 50 billion yuan. There are 3,493 companies with less than 10 billion yuan, of which 2,250 are less than 5 billion yuan.

In fact, the current differentiation of the turnover rate of A-shares has become more obvious. Taking the trading day of February 16 as an example, the number of listed companies with a turnover rate of less than 2% was 2,346, 1,010 were less than 1%, and 1,046 were greater than 5%.

With the increase in the number of listed companies, the valuation differentiation is becoming more and more obvious, and there is a view that A-shares will appear as Hong Kong stocks.

"In the Hong Kong stock market, there are many listed companies, and funds will only be concentrated in high-quality stocks. Underperforming stocks have no capital attention, no trading volume, and are gradually marginalized by the market. In the future, A-shares will gradually develop into Hong Kong stocks, and there are many penny stocks in the Hong Kong stock market. "Some market participants believe that the comprehensive registration system is relatively good for large-cap blue chip stocks, and small stocks and junk stocks may become outcasts of funds.

However, some people believe that A-shares are unlikely to be quickly turned into Hong Kong shares. "There is a big difference between the structure of domestic investors and Hong Kong stocks, and factors such as foreign exchange control, abundant liquidity, and low rates determine that retail investors will always have them. A large public offering of Hong Kong stock fund manager told the "Caijing" reporter, "the system changes, the pricing is still given by investors, and it is difficult for this investor structure to change quickly." The change in the structure of investors must be a huge market fluctuation that has washed out some investors.

Chen Wenyu, deputy general manager of Invesco Great Wall Fund, believes that there may be opportunities in small and medium-sized caps. "After the introduction of the registration system, it is expected that the number of small and medium-sized listed companies will increase. Referring to the experience of overseas mature markets, small and mid-cap investment strategies tend to have higher excess returns, which is worthy of investors' follow-up."

Despite this, there is a general consensus in the market: it will be more and more difficult for retail investors to make money in the future.

Liu Junhai, a professor at the Law School of Chinese University, believes that after the comprehensive reform of the registration system, stock prices may face a sharp rise and fall, especially junk stocks face greater market risks, and retail investors need to be more cautious.

"In the future, professional institutional investors will become market players. "This puts forward higher requirements for investors' professional experience, investment level and risk tolerance." ”

"High-quality companies may have more valuation premiums, investors' investment philosophies and investment strategies may be more value-oriented, and the process of institutionalization will accelerate. Fang Lei, deputy general manager of Xingshi Investment, told the "Caijing" reporter.

Under the full registration regime, the valuation and pricing logic of A-shares will change.

"The listing of unprofitable companies will become the new normal, and the original valuation and pricing logic will need to gradually adapt to this change. With the improvement of the delisting mechanism, more risk factors in delisting may need to be considered in the original valuation pricing logic. "Win Win Fund Analysis.

"In the process of shifting from the audit system to the registration system, the structure of listed companies, the structure of investors and the valuation system are all changing. Sun Jinju, vice president and director of the research institute of Kaiyuan Securities, told the "Caijing" reporter.

At the 2023 System Work Conference, the China Securities Regulatory Commission once again emphasized that it will improve the valuation and pricing logic and establish a valuation system with Chinese characteristics.

The meeting proposed to promote the improvement of the scientific effectiveness of valuation and pricing. It is necessary to profoundly grasp the characteristics of China's industrial development, the characteristics of the system and mechanism, the sustainable development ability of listed companies and other factors, promote all relevant parties to strengthen research and application of results, and gradually improve the valuation and pricing logic that adapts to different types of enterprises and the valuation system with Chinese characteristics, so as to better play the resource allocation function of the capital market.

Regulatory reshaping

"The core and most important thing of the comprehensive registration-based reform is not the IPO (initial public offering) and refinancing conditions, but the transformation of the functions of the China Securities Regulatory Commission and the separation of supervision and examination. An investment banker said bluntly.

The comprehensive registration system poses a higher challenge to supervision. Under the registration system, the regulator places more emphasis on the combination of decentralization and decentralization, increases the intensity of "management" while "delegating", establishes a whole-process supervision system, and increases the accountability of responsible entities.

On the one hand, the China Securities Regulatory Commission (CSRC) has established a supervision and restraint mechanism for the whole process of the operation of the power to supervise the issuance and listing supervision, and supervises and supervises the operation of the internal control system related to the issuance and listing review procedures and the issuance and registration procedures.

On the other hand, the reform further clarifies the division of responsibilities between the exchange and the CSRC. The China Securities Regulatory Commission will change its functions, supervise the review mechanism of the exchange's issuance and listing, carry out on-site inspections of the exchange on a regular and irregular basis, select projects in the process of the exchange's issuance and listing review according to the standard or randomly select a certain proportion, and pay attention to the implementation of the exchange's review concept and standards at the same time.

In terms of improving the review and registration procedures, we will adhere to the basic structure of the stock exchange review and the registration of the China Securities Regulatory Commission with their own focus and mutual convergence, further clarify the division of responsibilities between the stock exchange and the China Securities Regulatory Commission, and improve the efficiency and predictability of the review and registration.

If the stock exchange discovers major sensitive matters, major unprecedented, major public opinion, or major illegal clues during the review process, it shall promptly report to the CSRC for instructions. At the same time, the issuance review committee of the China Securities Regulatory Commission and the review committee of mergers and acquisitions of listed companies will be abolished.

Compared with the approval system, the registration system does not have the credit endorsement of the regulatory authorities, and the investment value of the enterprise is left to the investors to judge for themselves. The role of regulatory agencies has also changed, from "quality inspectors" to "referees", and the regulatory function has changed from pre-audit to whole-process supervision, especially during and after the event.

In this regulatory process, issues such as strengthening information disclosure, fulfilling the gatekeeping responsibilities of intermediaries, improving the delisting mechanism, and strengthening investor protection and risk disclosure have become the focus of market attention.

Information disclosure is one of the cores of the registration system. Anning Mao, EY Greater China Audit Services Leader, said that under the registration system, the responsibilities of all parties are: issuers must be clear, intermediaries must be clear, audit departments must ask questions, investors must think clearly, and regulators/judicial systems must investigate clearly.

In addition to the issuance side, daily continuous supervision is also an important part of strengthening risk disclosure. At the beginning of 2023, the Shanghai and Shenzhen Stock Exchanges issued the Notice on Strengthening the Information Disclosure of the 2022 Annual Report of Delisting Risk Companies, requiring listed companies that have been subject to financial delisting risk alerts to increase the frequency and pertinence of risk warnings before the disclosure of their annual reports. The investor protection threshold has moved further forward.

"We should continue to improve risk monitoring, early warning, disposal, and accountability mechanisms, and improve the initiative and predictability of risk prevention and control. A local regulator told the "Caijing" reporter.

For fraudulent issuance, financial fraud and other information disclosure fraud, the China Securities Regulatory Commission said that it will seriously investigate the responsibility of issuers, intermediaries and relevant personnel. Previously, the first securities class action lawsuit "Kangmei Case" awarded 2.459 billion yuan to compensate investors, which became a landmark event in the history of the rule of law in the capital market.

The comprehensive reform of the registration system has brought historic opportunities and unprecedented challenges to securities intermediaries. As the first line of defense for professional verification and verification, intermediaries are playing an increasingly important role as "gatekeepers".

The China Securities Regulatory Commission (CSRC) has repeatedly stressed the need to tighten the responsibilities of intermediaries. There are three changes in this reform: first, the "acceptance of the application documents" is adjusted to "the application is responsible"; the second is to adjust the sponsor's "comprehensive verification and verification" requirements for the issuance and listing application documents to "prudential verification"; and the third is to expand the on-site supervision from securities firms to all intermediaries.

"The comprehensive registration system does not mean that the regulation is relaxed, but it is strengthened. 'Declaration is responsibility' makes investment banks under great pressure, and they dare not take chances anymore to 'break through with illness'. 'Comprehensive verification and verification' has been changed to 'prudential verification', which strengthens the sense of diligence and responsibility of intermediaries. An investment banker told the "Caijing" reporter.

"The expansion of on-site supervision means that accountants are included as well, and the pressure on us increases. An accountant told the "Caijing" reporter that the implementation of the comprehensive registration system has reduced the entry threshold of the capital market to a certain extent and increased the audit risk, so the selection of high-quality customers is the key to future risk control.

Song Yixin, a lawyer at Shanghai Hanlian Law Firm, saw an opportunity for legal practitioners, and told Caijing that "the registration system has brought about an increase in legal service business, and it is inevitable that it will be mixed with bad credit disclosure, which will increase the joint litigation of securities." ”

The newly promulgated Administrative Measures for the Registration of Initial Public Offerings of Shares proposes to increase accountability for violations of laws and regulations, implement a stricter legal liability system, give full play to the role of the securities market entry ban system, and strengthen the self-discipline and supervision of the exchange.

Under the full implementation of the registration system, improving the delisting system and realizing the survival of the fittest is another important task faced by the regulators.

From the perspective of practical experience, since the pilot registration system, especially since the implementation of the new delisting rules, the pace of A-share delisting has accelerated significantly. Wind data shows that in 2022, a total of 50 A-share listed companies will be delisted, of which 45 will be forcibly delisted, all of which have set a new record, which is about the total number of delistings in the previous three years. From the perspective of the reasons for delisting, more than ninety percent were delisted because they touched the financial delisting indicators.

However, compared with the 6% delisting rate of U.S. stocks, the delisting rate of A-shares in 2022 is less than 1%. There is no shortage of voices in the market that the delisting still needs to be strengthened.

"Delisting needs to be strengthened, but it is difficult to achieve the same delisting rate as mature markets, because there are too many interests involved, including listed companies, local governments, etc. A lawyer told the "Caijing" reporter.

"It is proposed to add differentiated standards for different sectors. Li Feng, deputy dean of Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University, told the "Caijing" reporter, "In the current delisting standards, the differentiation is mainly reflected in the fact that the profit requirements of the entrepreneurship and entrepreneurship sector are more relaxed than those of the main board, but the differentiation is insufficient in terms of financial fraud identification standards and transaction standards." For example, for the 'large-cap blue chip' positioning of the Main Board market, it may be possible to add clauses such as 'no dividends or bonuses for × consecutive years', i.e., a delisting warning, etc., to further improve the adaptability of the delisting criteria to the positioning of different sectors. ”

Li Feng believes that in the actual implementation process, the supervision of the regulatory authorities is relatively weak, and it is difficult to discover and deal with the problems of some non-performing enterprises in a timely manner. Consideration may be given to increasing the intensity of delisting inspections, strengthening the transparency and impartiality of delisting reviews, and ensuring the fair implementation of market rules.

Market changes

With the advent of a new era, market participants are also facing different opportunities and challenges.

The China Securities Regulatory Commission (CSRC) has also made arrangements for IPO enterprises during the transitional period: those under review will be transferred to the stock exchange for review; those that have passed the examination and approval of the Issuance Examination Committee and obtained approval documents shall be issued and underwritten in accordance with the current relevant regulations; those that have passed the examination and approval of the Issuance Examination Committee but have not obtained approval documents may choose to implement the current regulations, or they may choose to suspend the issuance and underwriting in accordance with the procedures of the registration system after the full implementation of the registration system.

An investment banker told the "Caijing" reporter that there are main board projects under review at hand, which will be transferred to the exchange in the future, and are currently stepping up to supplement and adjust the materials.

Will the enterprises that have not obtained the approval choose to suspend it?" Personally, I don't think it's necessary, so the whole set of application materials has to be done again. The cost of time is also taken into account. The investment banker said.

A senior executive of a company to be listed told the "Caijing" reporter, "I have been paying attention to the progress of the comprehensive registration system, and the follow-up will be based on the company's own characteristics and corresponding sector attributes, select the listed sector, and plan as soon as possible." ”

There are also companies that have to re-select the listed sector due to changes in the rules.

A number of industry insiders said in an interview with the "Caijing" reporter that for specific companies, it may become more and more difficult to go public in the future. However, for specific industries and excellent enterprises, they will be favored by the market and funds.

In the pilot registration-based stage, in the fields of integrated circuits, biomedicine, and high-end equipment manufacturing, a number of "hard technology" enterprises in the field of "stuck neck" technology research have landed on the Science and Technology Innovation Board.

"The comprehensive registration system aims to promote industrial upgrading and transformation, support the development of the real economy, and benefit the industries supported by national policies, such as new energy, medicine and biology, security, independent and controllable fields, especially small and medium-sized enterprises in the field of scientific and technological innovation. Chen Wenyu told the "Caijing" reporter that the growth period of this kind of enterprises requires a large amount of capital investment, in the past due to the lack of high-quality assets for collateral, it is difficult to finance from the bank, with the full implementation of the registration system, the threshold for listing is reduced, and the listing efficiency is accelerated, enterprises can be financed through the capital market, and the funds are used for project research and development, working capital supplementation, equipment purchase, The integration of the upstream and downstream of the industrial chain, so as to achieve further breakthroughs in technology or cost, form an industry-leading advantage, and help form a demonstration effect and positive cycle in the industry.

Although the listing requirements have not been relaxed for a single enterprise under the registration system, for some companies in specific fields, their listing opportunities have increased. Many investors in the primary market believe that companies in strategic emerging industries are expected to receive support from investment institutions in the early stage of growth.

Chen Yulei, partner and chief investment officer of Pacific Century Capital, told Caijing: "In the past, the country's listing system had strict requirements for various indicators such as net profit, but later through the system reform, these indicators were broken, which broadened our investment horizons and target scope. Enterprises in strategic emerging industries supported by some countries, such as some semiconductor companies, may not be easy to list in these industries, and it is difficult for equity investors to exit in the early and medium term, so they are not in the scope of investment. But now, they are the target of investors' attention. ”

In Pang Ming's view, in the context of more inclusive listing conditions, direct financing channels for enterprises have been expanded. For enterprises and listed companies to be listed, their future composition is expected to show a multi-level, market-oriented, and high-quality trend, and the financing of high-quality small, medium and micro enterprises is expected to become the main force of IPO in the whole market. The main board is attractive to large and mature enterprises.

Under this change, brokers, venture capital, public funds and other institutions will be affected to varying degrees.

The brokerage industry will be the first to benefit from the increase in investment banking and brokerage business, but it will also pose a higher challenge to practitioners. "In the past five years, the average annual compound growth rate of A-share IPO financing has exceeded 40%. With the implementation of the full registration system, the number and amount of A-share financing are expected to reach a new high, driving the improvement of investment banks' comprehensive business capabilities and optimizing the competitive landscape. At the same time, we also recognize that the full registration system puts forward higher requirements for investment banks to perform their duties and responsibilities as sponsors. Investment banks should consciously improve their position, better serve the national strategy and capital market reform, build core capabilities that adapt to the comprehensive registration system, and play a good role as gatekeepers of the capital market. Wang Shuguang, head of the investment banking department of CICC, said.

Some of the interviewed investment bankers are quite calm about the news of the implementation of the comprehensive registration system, and seem to have a certain psychological expectation, "The comprehensive registration system is finally coming, which is definitely good for brokers, but it also puts forward higher requirements for the underwriting ability, pricing power and research ability of investment banks." Investment banks also need to improve their ability to identify high-quality companies in emerging industries."

The full registration system will accelerate the concentration of investment banking business in leading securities firms. CITIC Securities said that in the short term, benefiting from the possible expansion of the main board issuance scale, securities firms with a high proportion of investment banking income and a large scale of main board IPO queuing projects have benefited significantly. In the long run, the full implementation of the registration system will promote the transformation of investment banking business from the traditional resource-centric to sales, pricing and transaction service capabilities.

It is more difficult for venture capital institutions to make profits through the "pre-IPO" investment model. Shenzhen Venture Capital told the "Caijing" reporter that the income of venture capital funds when they withdraw may not be as good as the income under the previous approval system. Overvaluation in the primary market may lead to valuation inversion, and even listing may bring about the "bubble bursting effect" of overvaluation in the primary market.

"In addition, the divergence of new stock trends has put forward higher requirements for investment institutions to grasp the timing of exit from the secondary market, which will also have an impact on the industry. Shenzhen Capital said. As for the way to deal with it, early investment and small investment technology is a solution proposed by a number of investment institutions, and it is also an industry trend that has been formed in the past two years.

The comprehensive registration system will also have a far-reaching impact on the public offering industry.

Industry insiders believe that the comprehensive registration system tests investors' judgment on the quality of the company, and will further highlight the advantages of public funds in stock selection. At the same time, as the number of listed companies increases and the listing cycle shortens, challenges arise.

"In the future, public funds need to focus on improving the ability of early value discovery and research transformation efficiency. Chen Wenyu told the "Caijing" reporter, "The early value discovery is mainly reflected in the establishment of a research system for the whole industry chain, clarifying the industrial context, and being able to screen and study before the company goes public, so as to make reasonable pricing in the IPO inquiry stage." The efficiency of research transformation is reflected in consolidating the platform-based and systematic investment research team, and communicating the research results to the investment team in a timely and efficient manner.

(This article was originally published in Caijing magazine on February 20, 2023)