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China securities regulators unveils new details on IPO resumption

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(Credit: Reuters) A man looks at an electronic board at a brokerage house in Shanghai April 6, 2011. Shanghai Stock Exchange
December 14
5:49 AM 2013

The China Securities Regulatory Commission or CSRC gave new details on its plans to resume initial public offerings next year, Reuters reported. Citing a statement on the regulator's website, the report said CSRC will not anymore be involved in the pricing of the IPOs. This was in line with its pledge to allow the market to have a decisive role in pricing.

There was no formal cap made on the pricing of assets in an IPO before, but in the past, regulators often got involved in pricing and timing of new issues when they saw it fit, the report said.

The report noted that stock exchanges in Shanghai and Shenzhen also published rules related to the management of investor subscriptions in share sales. This was considered a key question especially for retail investors in China who comprise majority of transaction volumes.

Before, public debuts were highly distorted by huge triple-digit pops on the first day, the report said. This gave a huge payoff to connected institutional investors but burned later investors as prices fell below the set IPO price.

The CSRC had already addressed this problem by saying that it will compel the original stakeholder investors to repurchase their shares in case the price would go below the set IPO price within two years of the debut. The two exchanges, however, said in their statements that they will also do away with rules that will freeze trade in stocks on the first trading day in case the turnover went above thresholds which are set extraordinarily high. For the Shanghai bourse, the threshold is set at 80%, the report said.

Meanwhile, the new policies also required participants in IPO subscriptions to own shares worth CNY 10,000 or $1,600 in the other firms that are already in their portfolio, the report said.

About 50 Chinese companies are set to complete regulatory procedures in January and will hold their IPOs afterwards, the report said.

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