On September 18 this year, the Shanghai Stock Exchange issued the newly revised Implementation Measures for the Issuance and Underwriting of Shares on the Science and Technology Innovation Board of the Shanghai Stock Exchange, the Guidelines for the Application of the Rules for the Issuance and Underwriting of the Science and Technology Innovation Board of the Shanghai Stock Exchange No. 1 - Initial Public Offering of Shares, and on the same day, the Shenzhen Stock Exchange also issued the newly revised Implementation Rules for the Issuance and Underwriting of Securities on the Growth Enterprise Market. The above rules and regulations mainly refer to the issue of inquiry for the issuance of new shares under the registration system, and are also interpreted by the market as "new rules for inquiry".
Before the Shanghai and Shenzhen Exchanges revised the relevant inquiry rules, the inquiry and pricing of new shares on the Sci-Tech Innovation Board and the ChiNext Board needed to follow the principles of "10% exclusion of high prices" and "four values are low", resulting in many problems. For example, on the one hand, issuers and lead underwriters do not have any right to speak and price in the process of new stock inquiry and pricing, and have objectively been marginalized, which is obviously debatable. Under the inquiry mechanism, although the pricing of new shares is generated through inquiry, the issuer and the lead underwriter are obviously indispensable.
On the other hand, insufficient fundraising for new shares has become the norm. In the early stage of the pilot registration system of the Science and Technology Innovation Board, due to the implementation of market-oriented issuance, the "three highs" issuance of new shares on the Science and Technology Innovation Board with high issue price, high issuance price-earnings ratio and high super fundraising were more common. For example, the price-to-earnings ratio of the sci-tech board company Micro Company is as high as 170 times, which is much higher than the high-voltage line of 23 times of the CSI main board. However, since then, the price-to-earnings ratio of the sci-tech innovation board has gradually declined, mainly affected by the principle of "10% of high prices" and "four values are low". Under extreme circumstances, the institutional quotations of individual new stocks are surprisingly consistent, and they have also been questioned by the market as the existence of collusion between inquiry institutions. Moreover, it is also common for the situation that the highest and lowest prices of the shortlisted offers are only a few minutes apart. All of this leads to lower issue prices and often leads to insufficient fundraising for new shares.
It is also in this context, like the main board of Shanghai and Shenzhen, the new stocks of the science and technology innovation board and the ChiNext board also frequently stage the myth of "new stocks are undefeated". Before the adjustment of the rules, only the new shares of the Sci-Tech Innovation Board listed on December 4, 2019, Jianlong Micro-Nano, had a "break" on the day of listing, and there have been no cases of "breaks" since then. The reason for this is obviously inseparable from the shortcomings of the old version of the rules.
Up to now, the new regulations on inquiries have been implemented for more than a month, and from the results, the effect is more significant. According to the research data of securities companies, before the revision of the rules, the effective quotation range width center of the science and technology innovation board and the ChiNext board was 0.4% and 0.6% respectively. After the new rules for inquiry were landed, the quotations were relatively scattered, and the effective quotation range width center of the science and technology innovation board and the ChiNext board was expanded to 20.3% and 16.9% respectively. The improvement of the effective quotation range width center has created conditions for new shares to be more flexible in determining the issue price.
In addition, the principle of "four values is low" has also encountered a "breakthrough". For example, under the new regulations, the issue price of 7 new stocks such as high-speed rail electric and Yum Intelligent has exceeded the low value of "four values", and the excess range varies from 0.07% to 7.27%. Behind the breakthrough of the "four values are low" principle, it means that the issue price has increased.
Under the new rules of inquiry, the phenomenon of centralized quotation of new shares no longer appears, and issuers and lead underwriters also have a certain right to speak. More importantly, the phenomenon of insufficient fundraising for new stocks on the Star Market and the ChiNext Board has been greatly alleviated. There is no doubt that this will help to give play to the financing function of the Science and Technology Innovation Board and the ChiNext Board, and also help the Science and Technology Innovation Board and the ChiNext Board to support the real economy.
The increase in the issue price of new shares will have two consequences. The first is that the investment risk after the listing of new stocks is greater, the increase is narrowed, and the new income declines, which has been reflected in many new stocks. The second is the frequent "breakout" phenomenon of new stocks, and the myth of "undefeated new stocks" has begun to be shattered. For example, October 22 is the listing date of the new stocks on the Science and Technology Innovation Board, but the stock broke at the opening of the market, and the highest price of the day was lower than the issue price. On October 25, the new stock Kefu Medical of the ChiNext Board and the new stock of the Science and Technology Innovation Board of Kelda both broke at the opening. The winning investors not only did not share the dividends of the new shares, but also suffered losses. The phenomenon of concentrated new stock breaks on the Science and Technology Innovation Board and the ChiNext Board is undoubtedly not accidental.
Under the new rules of inquiry, a number of new stocks have broken, and the significance of this is self-evident. Under the new rules of inquiry, the issuance of new shares is more market-oriented, which objectively shows that the hidden risks of new shares have begun to be exposed, and it is also necessary to maintain a prudent attitude when investing in new stocks. Otherwise, it is possible to suffer or lose money, or to trap the fate.