Startups in Shanghai Hi-Tech Park accelerate IPO preparation plans following CSRC reforms of domestic listing rules

Tech startups at a major high-tech park in Shanghai are expected to be among the main beneficiaries of China’s reformed initial public offering (IPO) as it accelerates preparations for raising funds, according to an executive at the group that runs the park.

Chen Jun, president of the state-owned Shanghai Shibei Gaoxin Group, told reporters in a media briefing on Wednesday that three to four companies based in the Shibei Hi-Tech Park it manages are expected to list shares in the mainland every year between 2024 and 2024 2028, compared to just a possible IPO this year.

“The pace of listings will accelerate as the registration-based IPO system is implemented,” Chen said. “Promising tech startups will actively seek to raise funds on domestic exchanges.”

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Chen’s comments come three weeks after the China Securities Regulatory Commission (CSRC) announced sweeping changes to the rules governing the sale of new shares that will make fundraising easier for companies and give market forces full control over share prices.

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Securities regulators had until February 16 to solicit public opinion on the new rules before officially implementing them the next day. The CSRC said it would completely ditch its role in reviewing IPOs, transferring review power to the country’s stock exchanges.

Companies that sell shares on the Shanghai and Shenzhen stock exchanges will, for the first time, be given the freedom to price their shares based on market demand. Listing requirements such as Restrictions such as track records for sales and profits have been relaxed to allow companies in emerging industries to go public.

Under the registration-based system, exchanges require full disclosure of information from companies once they submit their listing applications.

Applicants will be given the green light to raise funds on the exchange once the exchange confirms the accuracy of the disclosures.

“Shibei Hi-tech Park, which is backed by the Shanghai government, has already attracted startups with good prospects,” said Ivan Li, fund manager at Loyal Wealth Management in Shanghai. “The number of IPOs by companies in this space will skyrocket after IPO rules are relaxed.”

The regulator is stopping scrutiny of IPOs in China and letting the market dictate share prices

Located in downtown Jingan, Shibei Hi-Tech Park is home to more than 3,000 companies involved in computing, artificial intelligence, big data, blockchain and software.

The parent company, Shibei Gaoxin Group, also runs investment businesses, and Chen said the group will continue to invest in promising startups to support their growth and expansion.

“The Shanghai government’s support for technology companies has effectively helped us weather the Covid-19 pandemic over the past year,” said Liu Chen, board secretary of Intsig Information, an AI company based in Shibei Hi-Tech Park. “The state landlord exempted us from paying rent for months while reducing taxes for us.”

While China has the second largest stock market in the world, with a market value of $11 trillion, the system for new stock offerings has long been a problem and provides fertile ground for misconduct and dereliction of duty.

For example, Yao Gang, a former vice chairman of the securities regulator known as the “King of IPOs,” was sentenced to 18 years in prison in 2018 after being found guilty of paying 69 million yuan ($10.2 million) accepted 2.1 million yuan in bribes from insider trading, according to a court statement at the time.

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