Author | Yao Yue
Edit| Fu Ying
Source | Unicorn Finance
After the issuance of the "New Nine Articles", the China Securities Regulatory Commission (CSRC) gave the fourth "quota" of securities firms to Bohai Securities Co., Ltd. (hereinafter referred to as Bohai Securities).
Source: Bohai Securities announcement
As for the reason why Bohai Securities was filed this time, the outside world is currently known only as "suspected of violating laws and regulations in the financial advisory business".
Unicorn Financial noted that in the five years from 2019 to 2023, three of the financial advisory business was the absolute main force of Bohai Securities' investment banking business. At the same time as being entrusted with an important task, the business has also received a warning letter from the China Securities Regulatory Commission, and this time it has been "turned on the red light" by the regulator, which will add some variables to the approval process of Bohai Securities on the way to IPO.
1
IPO on the way to the case,
Is there still a play to raise 2.726 billion yuan?
On May 14, Bohai Securities announced that the company had received the "Notice of Case Filing" from the China Securities Regulatory Commission. According to the content of the "Notice of Case Filing", the company was filed by the China Securities Regulatory Commission on April 24 on the grounds that the company was suspected of violating laws and regulations in the financial advisory business.
Bohai Securities stated in the above announcement that the company's current business situation is normal, and the event has no adverse impact on the company's solvency. However, the statement is obviously from the perspective of the issuer of bonds, and Bohai Securities currently has another identity - a company to be listed on the main board of the Shanghai Stock Exchange.
If a case is filed during the IPO process, how will the IPO process of the enterprise be affected?
"Regulators may investigate the filing of cases, which could lead to delays in the IPO approval process." Xia Hailong, a lawyer at Shanghai Shenlun Law Firm, said. According to the "Financial Associated Press", some investment bankers analyzed that after the issuer is filed, the review will be suspended first, and whether it will constitute a significant impact and whether it will affect the issuance conditions according to the violation and punishment results.
In other words, under normal circumstances, the filing of a case will delay the IPO process, but the ultimate impact on the IPO, including whether to suspend or even terminate, is also judged according to the violation and the punishment result.
According to the Administrative Measures for Initial Public Offerings and Listings, issuers are not allowed to "violate industry and commerce, taxation, land, environmental protection, customs and other laws and administrative regulations in the past 36 months, and be subject to administrative penalties, and the circumstances are serious." "Other circumstances that seriously harm the legitimate rights and interests of investors and the public interest." and so on.
In addition, the purpose of Bohai Securities' IPO fundraising is to "replenish blood", and judging from the 2023 financial report data, Bohai Securities' cash flow from operating activities and the increase in cash and cash equivalents are negative.
Bohai Securities intends to raise 2.726 billion yuan in this issuance, and the total amount of funds raised in this issuance will be used to supplement the company's working capital after deducting the issuance costs.
According to Wind data, in 2023, Bohai Securities' net cash flow from operating activities will be -1.067 billion yuan, the net increase in cash and cash equivalents will be -687 million yuan, and the balance of cash and cash equivalents at the end of the period will be 8.725 billion yuan.
According to the official website of the Shanghai Stock Exchange, Bohai Securities' IPO application was officially accepted in March 2023. The sponsor is Everbright Securities; The accounting firm is PricewaterhouseCoopers Zhongtian Certified Public Accountants (Special General Partnership). On June 30, 2023, Bohai Securities updated the submission of relevant financial information and resumed the review of issuance and listing.
As of press time, the review status of Bohai Securities is "inquired".
Source: Shanghai Stock Exchange official website
2
The financial advisory business has long been warned by the "yellow card".
According to the prospectus, Bohai Securities' financial advisory business mainly includes providing customers with various types of financing, financial arrangements, mergers and acquisitions, asset restructuring and other aspects of analysis, consulting, planning and other consulting services, as well as the new third board recommendation listing and continuous supervision and other related businesses.
In 2019, Bohai Securities' financial advisors performed exceptionally well, achieving revenue of 345 million yuan, and their contribution to the investment banking business once reached 82.73%. At that time, Bohai Securities had a lot of articles on the specific business of financial advisors in the financial report——
Bohai Securities said that as an independent financial adviser of Haowu shares, it "overcame many difficulties in the unfavorable market environment" and completed the supporting financing of Haowu shares in December 2019;
Bozheng Capital, a subsidiary of Bohai Securities, served as a financial advisor to participate in the investment management of Tianjin Jiuri New Materials Co., Ltd., which officially landed on the Science and Technology Innovation Board in November 2019; In terms of mergers and acquisitions, in 2019, Bozheng Capital facilitated Baili Electric (600468) to acquire the equity and supporting assets of Liaoning Rongxin Xingye Power Technology Co., Ltd., a subsidiary of Montnets Rongxin (002123);
In addition, Bohai Securities, as a financial adviser and joint sales agency, also issued the "Luneng Group Yingda Securities-Jinan Guihe Commercial Property Asset-backed Special Plan" (quasi-REITs).
Source: Canned Gallery
In November 2020, Bohai Securities was warned for its financial advisory business. According to the prospectus, at that time, the company was fined for failing to strictly implement the kernel procedures in the financial advisory project of Tianjin Jincheng State-owned Capital Investment and Operation Co., Ltd., and for failing to strictly implement the avoidance regulations in the project approval process in the public issuance of corporate bonds (Phase II) by Zhongtai Securities in 2019. Bohai Securities said that the rectification of the warning has been completed.
After that, in 2020 and 2021, Bohai Securities' financial advisory business declined sharply, achieving revenue of 66.9 million yuan and 20.4088 million yuan respectively, accounting for 43.11% and 14.24% of the revenue in investment banking business, respectively. Since 2022, Bohai Securities' financial advisory business has been boosted again, with revenues of 111 million yuan and 110 million yuan in 2022 and 2023 respectively; Investment banking business revenue accounted for 72.08% and 74.75% respectively.
Judging from the disclosure content of the prospectus, urban investment and real estate projects are the main business of Bohai Securities' financial advisors. In 2019, Bohai Securities completed the maturity resale and resale of bonds such as "16 Wanda 02", "16 Wanda 03" and "16 Sunac 01"; In 2020, it completed the maturity resale and resale of bonds such as "20 Dalian Wanda MTN001" and "20 Wanda 01"; In 2021, the resale business of "16 Sunac 07" was completed; From January to June 2022, the "20 Mingtou 01", "20 Xiyuan 01" and "20 Xiyuan 03" expired resale and resale business was completed.
In addition, from 2019 to the first half of 2022, Bohai Securities has also completed the recommended listing projects of new third board companies such as Jinyu Electric Industry (873078), Lingang Shipping (873441), Shu Pengshi (873161), Jinwanshixing (873186), and Zengguang Technology (873562).
Source: Canned Gallery
It is worth noting that the frequent change of persons in charge may be an important problem faced by Bohai Securities' investment banking business, including financial advisors.
In August 2018, Bohai Securities openly recruited a president and three vice presidents, including the vice president in charge of investment banking business, which caused a sensation in the securities industry. However, after only nearly two and a half years, with the departure of many senior executives, in January 2021, Bohai Securities once again launched the social recruitment of vice presidents.
At that time, according to the analysis of recruitment information, "Brokerage China" believed that in addition to the proprietary investment business, which was a new recruitment area, the remaining two vice presidents, including those in charge of investment banking business, needed to be re-recruited.
In addition, "Brokerage China" also analyzed that Chen Guiping, director of investment banking business, had previously been the general assistant of Western Securities, and joined Bohai Securities as the head of investment banking in November 2019, which is suspected to be a fill-in for the previous market recruitment of "vice president in charge of investment banking".
However, in December 2020, Chen Guiping was hired as director of investment banking, a position he held for less than a year, and resigned from the position in September 2021.
After Chen Guiping's resignation, Bohai Securities was in charge of investment banking business, and Yang Liang was targeted. Prior to his tenure at Bohai Securities, Yang Liang served as Deputy General Manager of Guorong Securities. According to the prospectus, Yang Liang began working at Bohai Securities in September 2022 and served as the company's vice president in October 2022.
According to the "Prospectus", Yang Liang was "held accountable" and issued warning letters in May and December 2022 respectively, because he was the person in charge of the financial advisory business of Guorong Securities' merger and reorganization at the time, and the vice president in charge of bond business, who had leadership or management responsibilities.
In this regard, Bohai Securities said that the warning content has nothing to do with the company's business, will not affect its normal performance of duties in the company, and will not have a significant adverse impact on the company's production and operation.
3
The IPO has been a long way in the past 8 years
Bohai Securities is a comprehensive brokerage company based in Tianjin, and also belongs to the financial territory of the "TEDA system". According to Wind, Bohai Securities is 26.96% owned by Tianjin TEDA International Holdings (Group) Co., Ltd. and is the controlling shareholder; The second largest shareholder is Tianjin TEDA Co., Ltd., holding 13.07% of the shares.
In September 2014, the China Securities Regulatory Commission (CSRC) issued a circular encouraging securities companies to further replenish their capital. Since then, brokerages have been planning to go public.
In October 2016, Bohai Securities signed a contract with Everbright Securities to receive IPO counseling. In August of the same year, the China Securities Regulatory Commission released information showing that there were 9 securities companies waiting in line for IPO, including Huaan Securities, Zheshang Securities, Zhongyuan Securities, Caitong Securities, Tianfeng Securities, Zhongtai Securities, Huaxi Securities, Dongguan Securities and China Galaxy Securities, and Bohai Securities was considered by the media to be the 10th.
However, while other brokerages have promoted or have successfully IPOs, Bohai Securities' progress has been quite slow, and it was not until December 2021 that it submitted its IPO declaration.
In May 2022, Bohai Securities, which has been seeking to be listed on the main board for nearly 6 years, finally received feedback from the China Securities Regulatory Commission. However, the China Securities Regulatory Commission (CSRC) issued 42 questions to it, focusing on three aspects: standardization, information disclosure and financial and accounting information, specifically involving issues such as the excessively high proportion of equity pledges, the declining share of brokerages year by year, the high dependence on self-management, and frequent changes in senior management.
In terms of performance, Bohai Securities performed better in 2018 and 2019. According to Wind data, Bohai Securities' operating income, operating profit and net profit in 2018 increased by 30.7%, 35.72% and 41.25% respectively compared with the previous year; In 2019, the above three figures were as high as 70.34%, 100.95% and 99.36%.
However, since 2020, the growth rate has slowed down significantly, and the growth rate of operating income has dropped to 8.64%. In 2021, when the industry generally increased its income, Bohai Securities achieved an operating income of 3.007 billion yuan, a year-on-year increase of only 1.71%, and the revenue growth rate was further reduced. However, in the same period, the net profit was 1.8 billion yuan, an increase of 62.78%. In 2022, operating and net profit will decrease by 52.91% and 72.16% year-on-year, respectively.
Bohai Securities' performance in 2023 will rebound, achieving operating income of 2.101 billion yuan, a year-on-year increase of 48.39%; net profit was 678 million yuan, a year-on-year increase of 35.27%.
Source: Wind Financial Terminal
In the past 7 years, Bohai Securities and Dongguan Securities have been the only "two behind" brokerages among the aforementioned 10. Other brokerages have successfully landed in the capital market.
However, among the current six brokerages that promote IPOs, Bohai Securities is still strong. According to Wind statistics, Caixin Securities, Kaiyuan Securities, Huabao Securities, Dongguan Securities, and Hualong Securities have entered a state of suspension because the financial information recorded in the issuance and listing application documents has expired and needs to be supplemented.
Do you think the IPO of Bohai Securities can be smoothly promoted after the case is filed? What could be the specific reason for the case? Feel free to leave a comment.