Yang Yunfei

1017800664@qq.com

A TOTAL of 46 firms have terminated their plans to launch initial public offerings (IPOs) on the domestic stock exchanges so far this year, data from China’s three bourses show.

The Beijing Stock Exchange said Tuesday that it approved the request from Fujian Senda Electric Co., a manufacturer of power distribution and modular data centers, to withdraw its IPO application, making the firm the latest one among a number of listing hopefuls to do so.

Exchange data show that among the 46 firms, 44 were voluntary withdrawals and one was halted due to failing to provide more listing documents in a given time of three months.

Auto parts maker Zhejiang Shenghuabo Electric Appliance Corp. had its listing application rejected by the Shanghai exchange amid public uproar over the family-controlled firm’s decision to dish out large amounts of cash dividends before it filed its listing application to raise funds from the public.

As part of efforts to revive market confidence and improve the quality of listed companies, China’s securities regulators have tightened scrutiny of new listings and vigorously cracked down on financial fraud in IPO applications.

The China Securities Regulatory Commission (CSRC) slapped a hefty fine of 4 million yuan (US$556,754) on Shanghai-based semiconductor company S2C Ltd. for falsifying its financial records in seeking to list on Shanghai’s STAR Market.

During its review of S2C’s 2021 listing documents, the CSRC found that the firm cooked its book and inflated its 2020 operating revenue and profit.

The CSRC also fined S2C’s executives, including its chairperson, chief executive officer and general manager, between one million yuan and three million yuan each.

The timing the CSRC chose to announce the penalty — Feb. 9, the last working day before the eight-day Chinese New Year holiday — and the fact that S2C had already pulled back its listing application in 2022 underscored regulators’ determination to crack down on financial fraud, analysts said.

The CSRC’s decision to penalize S2C sends a strong message to the market and would serve as a stark reminder of the importance of financial integrity, according to analysts.

The CSRC also said that IPO applicants and related parties will be held accountable for any violation found during the listing review process. Regulators will launch investigations into major law-breaking acts committed by IPO hopefuls and intermediaries even if they withdraw their IPO applications.

The number of firms filing IPO applications has decreased significantly since August 2023, when regulators tightened approval of new IPOs amid sluggish market conditions.

But data from the Beijing, Shanghai and Shenzhen stock exchanges show that as of Jan. 31, a total of 681 companies had submitted applications for A-share IPOs, seeking to raise a combined 766.80 billion yuan.

The protracted weakness in the domestic stock market has also dented IPO activities, with some firms withdrawing their IPO applications, leading to a sharp drop in the number of companies in the IPO pipeline.

So far, 291 firms have pulled back their listing applications since January 2023, according to statistics from Choice Data, the data brand under domestic financial service platform East Money Information Co.

Regulators’ move to tighten screws on IPOs and weed out companies that do not qualify in the listing review process will attract truly high-growth and high-tech companies to go public, said Henry Tang, an investor who only invests with his family members’ money.

He said that regulators should take a strong stance against those seeking to dump their entire stakes and “cash out” their investments through IPOs, rather than using the money raised from the domestic stock market to grow their firms stronger and better.

Tang also urged that harsher punishment should be meted out for intermediaries involved in market wrongdoings to protect the legitimate rights and interests of small and medium-sized investors and boost market confidence.