China’s IPO pipeline re-opens with a whimper
Chinese companies are abandoning domestic IPO plans en masse.
This week, Caixin reported that a whopping 315 companies have abandoned plans for an IPO so far in 2024, with 100 of those cancellations coming in June alone.
- This comes as Beijing actively encourages companies to list after an almost year-long freeze on IPOs.
Some context: In August 2023, the securities regulator (CSRC) put a hold on all IPO acceptances to prevent new listings from draining market liquidity as part of a broader effort to support overall A-share prices.
Meanwhile, the CSRC and the stock exchanges have been taking measures over the past few months to improve the overall quality of listed companies.
The problem: This focus has manifested in much stricter listing standards.
- So while the IPO pipeline is back open, loads of companies are rethinking their plans.
Still, there has been a trickle of listings back into the market.
- In the latter half of June, 28 corporate listings got the all-clear to move ahead.
Get smart: Financial officials plan to have the capital markets play a much bigger role in financing the next wave of innovative Chinese companies.
- Regulators have long sought to diminish the dominance of bank lending in financing corporate growth.
The upshot: The deal flow in China will remain slow for the foreseeable future as officials seek to ensure that only well-run and truly innovative companies can tap into equity financing.