Shanghai Stock Exchange Introduces New Measures to Facilitate Follow-on Offering

The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China calls for enhancing the inclusiveness and adaptability of the capital market and improving the coordinated functions of investment and financing. The 2025 Central Economic Work Conference requests continuous and in-depth reforms to the investment and financing mechanisms of the capital market. Follow-on offering, as one of the crucial investment and financing tools, plays a significant role in the growth of listed companies and efficient resource allocation.

To act on the guidance of the Fourth Plenary Session and the Central Economic Work Conference, Shanghai Stock Exchange (SSE) introduces new measures to facilitate follow-on offering in line with its core tasks of preventing risks, enhancing regulation, and promoting high-quality development. These measures aim to make follow-on offering more flexible and easy, thereby boosting innovation and fostering new quality productive forces. The measures are centered around the following principles: First, taking measures specific to meeting targets and addressing problems, focusing on issues that undermine the effects of follow-on offering and are widely raised by stakeholders, optimizing follow-on offering mechanisms, and further improving the quality and efficiency of follow-on offering reviews. Second, prioritizing support for high-quality and innovative companies, enhancing policy support for high-quality listed companies in follow-on offering, and guiding market resources to areas of new quality productive forces. Third, adopting a holistic approach, placing risk prevention and enhanced regulation at the forefront, and striving to build a dynamic and orderly market environment. Fourth, maintaining a steady and progressive approach to ensure the smooth and effective implementation of the measures. The specific measures are as follows:

First, further support high-quality listed companies in innovation and development. The SSE will optimize the follow-on offering review process and improve efficiency for high-quality listed companies with standardized operation, governance, and information disclosure, as well as high market recognition and representativeness. The principle of selecting the best among the best and prioritizing quality over quantity will be upheld. High-quality listed companies will be supported in using proceeds for developing new industries, business models, and technologies that synergize with their main businesses. Support will also be given to investments in second-growth-engine businesses, but reckless crossover or diversification attempts will be prohibited.

Second, better adapt to the follow-on offering needs of high-tech innovative companies. Formulate a "light assets and high R&D investment" criterion for companies listed on the Main Board. Revise the interval requirement between following-on offering activities. For high-tech companies that were loss-making when listing and are still not profitable, if the proceeds raised from the previous offering are substantially used up or if there has been no change in the intended use of the proceeds, they may initiate procedures such as announcing a follow-on offering proposal six months after the funds from the previous offering were received. Listed companies whose stock price has fallen below the issuance price may engage in reasonable fundraising through methods such as competitive-bid private placements and convertible bonds, provided that the raised funds will be used for their main business.

Third, make follow-on offering process more flexible and easy. When a listed company discloses a follow-on offering proposal, it should briefly disclose how proceeds from previous offering are used and the plan for remaining funds. At the time of application, the previously raised proceeds should have been substantially used up. Content already disclosed in periodic reports and other documents can be directly referenced in the follow-on offering application materials as long as there has been no change in facts. The negative list for the simplified follow-on offering procedure will be revised.

Fourth, strengthen oversight of the entire follow-on offering process. The listed companies and intermediaries shall strictly fulfill their duties as the disclosure obligator and the "gatekeeper". A work mechanism for disclosing follow-on offering proposals on the stock exchange shall be established to rigorously prevent listed companies from seeking follow-on financing amidst unresolved problems. Listed companies shall make timely decisions and promptly submit applications after disclosing their follow-on offering proposals. Requirements for announcing follow-on offering proposals will be adjusted. For fixed-price private placements aimed at obtaining control of a listed company, both the listed company and the target investors are required to make a public commitment to finalize the offering before the approval letter expires. Stricter oversight of raised proceeds will be imposed. Violations such as unauthorized changes to the use of proceeds or unilaterally extend the period for temporarily supplementing working capital will be held accountable. The SSE will intensify both ongoing and ex-post supervision, and take strict actions against any illegal or non-compliant activities in follow-on offering.

Under the guidance of China Securities Regulatory Commission, the SSE will accelerate the rule-making and facilitate exemplary deals, and further improve the flexibility and convenience of follow-on offering, thereby enhancing the market's sense of gain.