1. Can you brief us on the acceptance of the applications for issuing and listing stocks on the sci-tech innovation board (the “Board” for short) so far?
A: On March 18, the SSE review system for issuing and listing stocks on the Board (the “SSE Review System” for short) officially began accepting applications from issuers. As of 17:00 on March 22, the SSE Review System received the documents on application for issuing and listing stock on the Board filed by a total of 13 companies. In accordance with the procedures and requirements stipulated in relevant rules, the SSE review department for issuance and listing on the Board accomplished the verification of the completeness of the application documents submitted by 9 of the companies, and made the requirements for supplementation and correction.
In accordance with relevant rules, the application documents submitted by 9 companies, including Amlogic (CA) Co., Inc., Yantai Raytron Technology Co., Ltd., Jiangsu Cnano Technology Co., Ltd., Jiangsu Beiren Robot System Co., Ltd., Guangdong Liyuanheng Intelligent Equipment Co., Ltd., Ningbo Ronbay Lithium Battery Material Co., Ltd., HeJian Technology (Suzhou) Co., Ltd., ANKON Optoelectronic Technology (Wuhan) Co., Ltd. and Wuhan Keqian Biology Co., Ltd., have met the requirements for completeness after supplementation and correction, and the SSE has decided to accept the applications. The notices on acceptance have been sent to the issuers and their sponsors through the SSE Review System, and the relevant application documents of the issuers have been pre-disclosed on the official website of the SSE.
In addition, the four companies submitting the applications after 9:00 pm on March 21 and on March 22, including Xiamen Amoytop Biotech Engineering Co., Ltd., Fujian RICOM Co., Ltd., Shenzhen Appotronics Corporation Ltd. and Shenzhen BASDA Medical Apparatus Co., Ltd., are still having the completeness checked. The SSE will timely conduct the verification and make a decision on whether to accept the application in accordance with the prescribed procedures and requirements.
The acceptance of the application of the above-mentioned companies for issuance and listing on the Board marks another step forward in the SSE’s practice and operation for the reform of launching the Board and piloting the registration-based IPO system. Going forward, the SSE will, under the leadership of the China Securities Regulatory Commission (CSRC), organize its resources and continue to make efforts in acceptance, review and other processes on the basis of the general principle of “high standards, steady start, intensified regulation and risk control”, so as to ensure the smooth implementation and orderly advancement of the reform.
2. Can you brief us on the overall situations of the first batch of companies whose applications have been accepted?
A: The basic situations of the first batch of 9 companies are as follows: from the perspective of the sectors or industries, 3 companies are in the new generation information technology sector, with 2 in the high-end equipment industry, 2 in the biomedicine industry, 1 in the new material industry and 1 in the new energy sector; in terms of the listing standards, 6 companies choose the first set of listing standards of “market capitalization + net profit / income”, 3 companies adopted the 4th set of listing standards of “market capitalization + income”, including one unprofitable company, and the average market value of the 9 companies is expected to be RMB7.276 billion, with the figure estimated at RMB5.935 billion after excluding the company with the largest anticipated market value (RMB18 billion); in accordance with the financial indicators, excluding one loss-making company (in the most recent year, the total asset was RMB24.194 billion, the operating income amounted to RMB3.694 billion and the net profit stood at RMB-2.602 billion), the average total asset of the other 8 companies was RMB1.532 billion at the end of the most recent year, with the average operating income in the most recent fiscal year at RMB1.034 billion, and the average net profit after deducting non-recurring profit and loss at RMB164 million in the most recent fiscal year, and in the most recent fiscal year, the companies recorded an average growth rate of 61.43% in the operating income, with the investments in research and development accounting for 5 to 20% of the operating incomes. In general, despite the different industries, sizes, business conditions and development stages, the above-mentioned companies are characterized by sci-tech innovation to some extent on the whole, which reflects the inclusiveness of the conditions for the issuance and listing on the Board.
At present, the acceptance of the companies’ applications for listing on the Board has just begun. According to the sources, relevant issuers and sponsors are making application documents in strict accordance with the relevant rules of the CSRC and the SSE, and are submitting the applications successively. The SSE will always adhere to the market and law-based direction for reform, accurately grasp the functions of the Board, and steadily make follow-up efforts in acceptance of companies’ applications, review for issuance and listing and other areas. At the same time, we also hope that issuers, intermediaries and all market participants could work together to create a good environment for the high-quality enterprises of sci-tech innovation to issue and list stocks on the Board and jointly ensure a smooth start and long-term stable development for the Board.
3. Can you brief us on the key factors for the inspection of completeness that the SSE pays attention to in the acceptance stage?
A: According to the relevant provisions of the “Rules of Shanghai Stock Exchange for Review of Issuing and Listing Stocks on the Sci-tech Innovation Board”, the “Guidelines of Shanghai Stock Exchange for the Acceptance of Application Documents on Issuing and Listing Stocks on the Sci-tech Innovation Board” and other related rules, the SSE will conduct the review in a timely manner to decide whether or not to accept the application after receiving the application documents. In the review for the acceptance of the above-mentioned companies’ applications, the SSE focused on checking the completeness of the application documents, mainly paying attention to the following factors: whether the application documents are consistent with the document catalogue specified by the CSRC and the SSE, whether the document name is in line with the contents of the document itself, whether the signatures and seals on the documents are complete, clear and consistent, whether the document typesetting and other formats meet relevant requirements, and whether the intermediary’s report quoted in the prospectus is valid.
Here, we remind the issuers and the sponsors to make effective efforts in preparing the application documents such as the prospectus by carefully referring to the newly introduced systems and rules for the Board, ensure the quality of the application documents, and jointly improve the efficiency in application, acceptance and follow-up review.
In addition to the inspection for completeness, we have also noticed that there is a gap between the contents of some of the application documents, especially the prospectuses, and the requirements of the securities regulators for the formats. For example, simply copying the document templates for other sectors, the prospectus fails to make adequate pertinent disclosure of the company’s core technology, industry status, risk factors, etc. on the basis of the functions of the Board; the issuer’s special explanation for meeting the orientation of the Board is not sufficient, or the sponsor's special opinions and descriptions about the issuer meeting the requirements and orientation for the Board are not adequate. In the follow-up review, we will, through the inquiries for review, urge the issuers and the sponsoring institutions to improve the relevant contents of information disclosure and ensure the quality of disclosed information. All issuers and sponsors shall prepare the prospectuses in advance according to the requirements, which will reduce unnecessary follow-up inquiries, and improve the efficiency of the review.
4. Can you brief us on the main requirements for the companies to supplement or correct the application documents during the acceptance?
A: During the acceptance, there were indeed some circumstances in the issuers’ application documents that did not meet the requirements for completeness, mainly including: the prospectus failing to disclose that the relevant subsidiaries of the sponsoring institution will participate in the strategic allocation in the issuance according to the rules; failing to submit the necessary documents required for the application for exemption from information disclosure; lacking signatures as required in the application documents and the naming of the documents failing to meet the related requirements of the SSE.
In the acceptance and review of the applications, the SSE’s issuance and listing review department, according to the rules, issued the notices on supplementation and correction to make the requirements at a time, and the relevant issuers and sponsors involved completed the supplementation and correction and resubmitted the relevant documents in a timely manner.
It is necessary to remind all issuers and sponsors that if an issuer supplements or corrects the application documents, the time of the SSE receiving the application documents shall be the time when the issuer meets all the requirements for supplementation and correction. That is to say, in the case of supplementation and correction, the SSE’s time limit for acceptance (within 5 working days after submission) shall be recalculated after the issuer submits the supplemented and corrected documents meeting the requirements. Therefore, it is hoped that the issuers and the sponsors could prepare the application documents in strict accordance with the relevant rules of the CSRC and the SSE, so as to avoid delays because of the application documents failing to meet the requirements for completeness.
5. Can you brief us on what the sponsors should pay attention to when recommending companies to go public on the Board?
A: Some new requirements have been made for the sponsors in launching the Board and piloting the registration-based IPO system. When recommending companies to go public on the Board, the sponsors shall strictly follow the requirements such as strengthening internal control, submitting and depositing working papers, piloting the parallel investment of the sponsors' related subsidiaries, and extending the continuous supervision period. According to the first batch of the applications of companies and the acceptance, the following suggestions are made to the sponsors:
First of all, the sponsors shall accurately grasp the requirements for diligence and fulfillment of duties in piloting the registration-based IPO system for the Board, and effectively improve the quality of practice. It is necessary to get further familiar with and thoroughly understand the requirements and contents of relevant rules, especially the differentiated institutional arrangements for the Board, strictly perform the sponsorship duties in accordance with relevant rules, fully learn about the issuer's business conditions and risks, comprehensively check and verify the application documents and information disclosure materials for the issuance , and effectively play the role of “gatekeeper” for the capital market. The SSE will regularly assess the practice quality of the sponsors engaging in the businesses related to issuing and listing stocks on the Board, with the assessment results to be used for the reference in the review for issuance and listing.
Secondly, the sponsors shall accurately grasp the requirements of the orientation of the Board, and give priority to the high-quality enterprises with obvious characteristics of sci-tech innovation in recommending companies to go public on the Board. It is necessary to strictly abide by the "Implementation Opinions on Launching the Sci-tech Innovation Board and Piloting the Registration-based IPO System on the Shanghai Stock Exchange" and the "Measures for Administration of Registration for Initial Public Offering on the Sci-tech Innovation Board (for Trial Implementation)” formulated by the CSRC as well as the “Rules of Shanghai Stock Exchange for Review of Issuing and Listing Stocks on the Sci-tech Innovation Board” and the “Guidelines of Shanghai Stock Exchange for Recommending Enterprises for Listing on the Sci-tech Innovation Board”, accurately grasp the orientation of the Board, and in recommendation give priority to the enterprises of sci-tech innovation that the Board focuses on providing services and support for. The SSE will examine whether the issuer meets the requirements for issuance, listing and information disclosure. During the review, the SSE will pay attention to whether the sponsor's professional judgment on whether the issuer conforms to the functions of the Board is reasonable, and make targeted inquiries about this; in assessing the practice quality of the sponsors and the sponsors’ representatives, the SSE will consider the sponsors’ work quality in checking and demonstrating whether an issuer conforms to the orientation of the Board.
Thirdly, the sponsors shall accurately grasp the requirements for the contents and formats of the application documents on issuance and listing, and effectively control the quality of the application documents. It is necessary to strictly meet the requirements of the rules such as the "Standards for the Contents and Formats of Information Disclosure by Companies Offering Securities to the Public No. 42 - Application Documents for Initial Public Offering of Stocks and Listing on the Sci-tech Innovation Board” issued by the CSRC and the “Guidelines of Shanghai Stock Exchange for Acceptance of Application Documents on Issuing and Listing Stocks on the Sci-tech Innovation Board”, earnestly prepare the applications, adhere to the priority of quality over time, ensure the application documents are complete and standardized, and avoid the low quality in preparation or application with serious risks for the purpose of “jumping the gun”. If the application documents are not complete, the SSE will require the issuer and the sponsoring institution to make supplements and corrections within 30 working days; if there is any obvious or significant flaw in the contents of the application documents, the SSE will pay special attention in the inquiries for review. According to the relevant rules, the quality of the application documents and the quality of the inquiry responses will be linked to the assessment of the sponsor's practice quality, and the quality of the IPO information disclosure will be connected with the sponsor's qualification.
The SSE will implement the regulatory concept of “taking information disclosure as the core”. After accepting an issuer's application, the SSE will launch one or more rounds of inquiries on the application documents for issuance of the listing. The sponsor shall conduct necessary due diligence and promptly reply to the review inquiries one by one, with the inquiries and replies to be announced in the market in a timely manner. If there is any major suspicion in the application documents for issuance and listing and the issuer and its sponsor and securities service institutions cannot make reasonable explanations in the reply, the on-site inspection may be initiated in accordance with the rules. If the issuer and its controlling shareholder, actual controller, sponsor, securities service institutions and related parties are suspected of violations in securities, the case will be reported to the CSRC for investigation and punishment according to law.