China issues new IPO rules, new listings to resume soon
BEIJING, June 7
BEIJING, June 7 (Reuters) - China published draft rules on Friday to improve the transparency and pricing of initial public offerings on domestic stock markets, a move that could signal a resumption in new listing approvals after a seven-month hiatus.
A decision by China's regulators last November to suspend all new IPOs as part of a crackdown on fraud has seen the number of applicants fall by more than 15 percent, with about 140 companies dropping their listing plans because of poor accounting quality or a slump in profits.
The new rule, now open to public review, said issuers must have valid quotations from at least 50 institutional and 50 individual investors to decide prices for IPOs involving more than 400 million shares, according to a statement on the website of the China Securities Regulatory Commission, the industry watchdog.
It will also require those that have been given the regulatory green light but have not yet launched IPOs to update information regularly and even reapply for approval if there are any major changes.
The rule will allow lead underwriters to reserve a certain amount of new shares to select investors, potentially benefiting brokerages with a strong institutional client base. Previously all new shares were sold through auctions.
If the shares of a firm close below IPO prices six months after listing, controlling stakeholders as well as board members and senior executives who own shares must promise to extend the lockup period by at least another six months.
It will also encourage companies to raise funds via a variety of other options apart from common shares, including bond sales.
Companies must publish contingency plans describing what they will do if share prices fall below earnings per share within five years of the IPO.
China's CSI300 index, consisting of leading firms on domestic stock exchanges, posted its first weekly loss in six weeks this week, falling 4.7 percent. (Reporting by Langi Chiang and David Stanway; Editing by Robert Birsel)