Six Major Problems And Countermeasures In The Growth Enterprise Market

[Abstract]

First, the current growth enterprise market in China exists.

Over the past more than 130 years since the establishment of the GEM market, the number of listed companies has reached to nearly 100 billion yuan, which has strongly supported the development of venture enterprises, venture capital and strategic emerging industries, but there are still six major problems to be solved.

First, the issue of new shares at a high price.

The first batch of listed companies on GEM was 58 times earnings and second times the price earnings ratio of 88 times. Now the average price earnings ratio of gem is nearly 70 times, creating more than 500 billionaires in one year, making gem become a place for "making rich", and aggravating unfair distribution of society.

The main reason is that there is a certain degree of institutional monopoly in the process of inquiry, the degree of marketization of IPO is not high, the process of issuing approval is inefficient, and there is plenty of off site liquidity, and investors do not have enough understanding of the nonlinear growth and risk characteristics of GEM companies, and the behavior of individual investors is irrational.

In addition, due to the fear of excessive speculation, the GEM market has been locked in the main board market for three years, holding shares for controlling shareholders or actual controllers and related parties for a period of 12 years. The sale of shares in the company's senior shares within one month after the year's lock up does not exceed 5% of the total share capital of the company, and does not exceed 10% of the total share capital of the company within 24 months.

All of these affect the quantity of tradable shares and objectively encourage speculation in the market.

Two is the problem of idle funds raised.

Issuing new shares at a high price will inevitably lead to excessive capital raising and idle.

According to statistics, the utilization rate of gem raised funds is only 21.85%, and a large amount of capital is idle in banks or investment in real estate.

A large number of GEM companies are holding heavy capital and can not find ways to use funds.

By contrast, tens of millions of small and medium-sized enterprises have no financing, and are forced to turn to underground banks and usury institutions. The high interest burden makes them overburdened.

However, it should be noted that the use of funds for listed companies has been strictly regulated. Under the condition of global economic recession and domestic excess capacity, the idle capital of GEM companies is also a cautious expression of corporate investment decisions.

The three is the resignation of executives.

High priced new shares issued by gem are overdrawn by future growth of listed companies, and entrepreneurs do not have to continue to work hard.

In the past year, 67 executives of 33 GEM companies have resigned.

Compared with the motherboard, the resignation rate of GEM companies is too high.

Excessive growth of stock price overdraft is also a damage to entrepreneurship.

However, we should treat this problem dialectically.

According to statistics, nearly 70 executives resigned from more than 30 GEM companies, of which 22 held shares in the company, while 2/3 resigned executives did not hold shares, and most of them were non core members of the enterprise. Some of the executives resigned to normal succession and mobilization. Some executives resigned cash but did not become mainstream.

Four is the issue of "changing the face" after the listing.

From the semi annual report of gem in 2010, "high growth" has evolved into "low growth", and a number of companies have negative growth.

The 105 GEM companies' net profit in the first half of the year increased by 25.63%, far lower than the 45.91% growth rate of the first half of the small and medium-sized companies in the first half of the year, even lower than the average 41.17% increase of the 1947 listed companies in the two cities of Shenzhen and Shanghai, and 23 of the Growth Company failed, such as Bao de shares and Huaping shares, and even loss companies, such as the League of nations aquatic products.

However, the gem is different from the motherboard and small and medium board.

In 2008, due to the impact of the financial crisis, the growth of the main board and small and medium-sized board companies was relatively low. In 2009 and 2010, China's economy resumed rapid growth.

The growth of GEM companies in 2008 was faster and the base was higher.

In addition, the internal management of the gem is in the process of readjustment and adaptation, and its performance fluctuation has its objective reasons.

The five problem is corruption in PE.

PE corruption refers to the fact that some people invest in the name of private equity investment through various relationships before listing, and sell arbitrage after listing.

It is a common phenomenon of many new stock issuing companies that sponsors use their power to seek private interests and sponsor representatives share ownership.

The securities regulatory authorities strictly approved the issue of new shares, artificially created insufficient supply of new shares and high price earnings ratio of new shares, and encouraged rent seeking and corruption.

But it can not be considered that all PE investors are corrupt.

In fact, PE and venture capital (VC) are specialized capital operations. They play an active role in promoting the development of high-tech start-ups and upgrading the national industrial structure, undertaking investment risks, and getting a certain excess investment return is reasonable.

At present, PE corruption is a temporary phenomenon. With the marketization reform of the IPO system, this phenomenon will gradually decrease.

The six is the lack of delisting system.

The delisting of overseas GEM companies is a common phenomenon, and the delisting rate of GEM companies is significantly higher than that of the main board companies.

About 8% of the companies in the US are delisted every year, and the rate of delisting of the British alternative investment market (AIM) is as high as 12%.

It is imperative to establish a direct delisting system for GEM companies, but this is a systematic project involving a series of supporting systems.

In particular, an effective compensation mechanism should be established to protect the rights and interests of minority shareholders and maintain social stability.

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These "growing pains" encountered by the growth enterprise market are problems in development and should be solved step by step through improving relevant systems and accelerating financial innovation.

First, reform the approval system of IPO.

The market-oriented reform of IPO system is the right direction, but now that the approval system is directly pformed into registration system, the timing is not ripe. We should gradually create conditions for the implementation of registration system.

Complete marketization includes not only the marketization of IPO pricing, but also the role of intermediaries and the minimization of administrative intervention.

At present, the China Securities Regulatory Commission (CSRC) has implemented the "strict" examination and approval in the issue of gem IPO, in order to "check" the quality of the listed companies, but because the "gate" is too small, a very limited number of people are pricing the market in the cage, artificially created the imbalance between supply and demand of new shares, and raised the price of the IPO.

To return to the "window guidance" is obviously a historical setback. We should put the power of examining and issuing new shares under the Shenzhen stock exchange to make the exchange responsibility, power and profit consistent, so that a large number of small and medium-sized enterprises will have the opportunity to go public.

Second, strengthen the responsibility of Securities Sponsors and intermediaries.

The main performance of the sponsors' low quality sponsors is that some sponsors are eager to make quick profits and quick profits, offer materials of sponsorship hastily, lack of responsibility for sponsors, fail to fulfill due diligence, keep internal control system on paper, issue application and disclosure of information to avoid serious problems, guard against issuing conditions, lax enforcement of excellent and medium selection mechanism, lack of solid guidance work, insufficient ability of sponsor representatives to practise, and lack of correct guidance to media opinion.

Securities institutions should weaken the role of sponsor channel and attach importance to the construction of valuation ability and professional service ability.

The SFC and the securities association should strengthen the supervision of Securities Sponsors, and strengthen the supervision of intermediaries such as accountants and lawyers, enhance their sense of responsibility, improve their moral quality, and ensure that listed companies are in strict accordance with the requirements and conditions of the GEM market.

Third, increase the proportion of tradable shares of GEM companies and reduce stock lock time.

We should speed up the "full circulation" of new shares and shorten the time of locking.

It is too long to lock up the warehouse, resulting in the unbalance of supply and demand, which will inevitably raise the issue price.

Shorten the lock time, actually increase the supply of stocks, and use the two tier market price to force the primary market price to return to reason.

Of course, all shareholders should be treated differently. The time of controlling shareholders can be locked longer, and the remaining shareholders, such as strategic investors, can quit on the day of listing.

Stock issuance is to allow venture shareholders to cash in the primary market, and the cash after realisation has not entered the listed companies, which will have an impact on the financing of enterprises.

Therefore, it is not necessary to "rule by one size" to stipulate whether or not to adopt the stock issuing method, and stipulate that the issuer should choose the stock issue or the incremental issuance method himself.

Fourth, speed up the system innovation and product innovation of the growth enterprise market.

First, we should speed up the establishment of the exit mechanism for GEM companies. The GEM companies and their controlling shareholders, executives and sponsor agencies are all responsible for delisting. They should share the responsibility of delisting compensation.

The two is to explore the risk hedging tools for gem market and establish the internal stability mechanism of the market.

It is suggested that stock index futures and options, as well as margin trading, be discussed in a timely manner.

The three is the valuation method of innovation and growth enterprise board.

Because of the instability of business operation, the diversity of business models and the particularity of growth cycle, it is not appropriate to adopt price earnings ratio and market price ratio.

Diversified valuation methods should be created in practice.

The four is to explore the mixed trading mechanism of centralized bidding and market maker system.

A GEM listed company can provide liquidity for many market makers. It can not only inhibit "sitting" and market manipulation, but also play a positive role in guiding rational pricing and improving corporate governance.

Fifth, reduce PE profit space, strengthen supervision and increase the cost of violating regulations.

By implementing the "three principles" in the IPO of gem, we can reduce the price earnings ratio of new stock market and reduce the profit margin of PE as a whole. At the same time, we should impose a capital gains tax on PE and adjust its unreasonable income.

Of course, we should also take a dialectical view of the phenomenon of "creating wealth" in the growth enterprise market.

Entrepreneurial shareholders must be encouraged and recognized through hard work to become tens of millions and billionaires. We should create a good atmosphere to encourage businesses to become rich in the whole society.

For a listed company that has the facts of concealment, fraud and listing, the listed company shall be ordered to withdraw immediately, and the loss of the investor shall be borne by the listed company.

We should strengthen the information disclosure of executives' stock holdings in GEM companies, standardize the resignation of executives in the short term after the listing, so as to reduce the negative impact of executives' resignation on GEM listed companies.