Inspiration From The Rise And Fall Of Gem Investment Bank: Ping An Securities

In this year's science and technology board to bring brokerage firms investment banking in full swing of the new business, Shenzhen Stock Exchange's GEM has gone through a full ten years.

For the gem, which provides financing and listing service capital platform for small and medium sized growth firms in the start-up stage, it has also become a foothold for many non leading securities firms to invest in the past 10 years.

In twenty-first Century, the economic report reporter statistics Wind data found that over the past 10 years, more than 780 enterprises have completed IPO financing and listed on GEM, and the total funds raised are more than 410 billion yuan, and the corresponding underwriting expenses of up to 27 billion 247 million yuan have been derived, which are shared by not less than 79 brokerages.

In this process, a group of securities investment banks represented by Ping An Securities started to play the leading role in the venture, and became the highest income institution in the field. But at the same time, radical business expansion has also led some GEM companies to take the risk of going public and eventually exposing risks.

However, some people in the industry believe that, compared with the income generated by the tide of investment in the SME market, the punishment of the gem on the institutional arrangements is still relatively low, and in the future registration system, the sponsor should undertake more fiduciary duties and responsibilities.

Safe past

When it comes to investment banking in gem, no one will mention Ping An Securities. This small and medium brokerage company with headquarters in Shenzhen stock exchange is still the biggest winner in gem business.

In fact, as early as the first year of the establishment of gem, Ping An Securities took 17 of the 103 GEM companies through only more than 100 people's investment banking team, occupying 14% of the total market share of that time, and became a well deserved "black horse" in the investment banking market.

According to people close to Ping An Securities, before the establishment of the gem, Ping An Securities made relevant preparations and regarded the growth enterprise market as the focus of development of investment banks.

"At that time, the company had thought that the gem was a draught of investment banking business, and many projects had been prepared before the opening of the growth enterprise board, and also participated in the communication and opinion solicitation with the regulatory authorities." A former investment bank of Ping An Securities recalled.

Through the rise of gem business, Ping An Securities's investment banking strategy has been evaluated as "high and precise, fast and real".

However, for a long time, the intensity of radicalism also made Ping An Securities fall into a false whirlpool. In September 27, 2011, Wanfu branch, an agricultural enterprise sponsored by Ping An Securities, was listed on the growth enterprise market. Less than a year later, it broke the scandal of financial fraud and led the SFC to investigate it.

Under the pressure of supervision, Wanfu Sheng Ke admitted that it increased its operating income by up to 740 million yuan from 2008 to 2011 and its net profit of 160 million yuan.

As the first case of IPO fraud in GEM companies, the sponsor's Ping An Securities failed to escape. Finally, the SFC made a decision to suspend the sponsor's business license for 3 months and fines 76 million 650 thousand yuan.

However, Ping An Securities is not alone in this tramway. It has been exposed to counterfeit small and medium-sized board companies before the incident.

The accident happened frequently in the handling project, so that Ping An Securities was once a "IPO garbage maker" from the industry black horse.

Non leading opportunities

Despite the constant punishment, Ping An Securities's gem income is still "thin dead camels than horses."

In twenty-first Century, the economic statistics reporter Wind statistics found that as of the ten years of October 29, 2019, the sponsor underwriting expenses of Ping An Securities as sponsor agency amounted to 1 billion 995 million yuan, accounting for 7.32% of the total cost of IPO projects in 10 years, and is still the most expensive IPO company in gem.

However, in terms of quantity, there are 51 gem projects in Ping An Securities in ten years, ranking only third in the industry.

"In fact, the income is mostly related to the IPO over 2010-2011 years ago, when the overinvestment raised the excess returns to the investment bank team." The former Ping An Securities negotiable frankly said, "but in 2014, restrictions on over raising, limited price issuance plus penalties and other factors, income has been greatly affected."

Data show that in Ping An Securities's top ten gem projects, up to 9 single projects came from 2013. Not only that, as many as 46 items of Ping An Securities's 51 items were generated before 2013, and the total income reached 1 billion 835 million yuan, while only 5 single gem projects were contributed after 2014.

This also means that in the first ten years of IPO, Ping An Securities, which earned more than 9 of its income, was created within three years before the start of the gem.

As a matter of fact, the GEM listed at that time was also a leading event for many non head brokerages. Statistics show that following the Ping An Securities, Guoxin Securities, GF Securities and China Merchants Securities three brokerages respectively undertook 1 billion 955 million yuan, 1 billion 877 million yuan and 1 billion 529 million yuan in the sponsorship underwriting income, followed by CITIC and CITIC as the industry's head investment bank after these four vouchers.

However, similar to Ping An Securities, some of the leading investment banks in gem business also come mainly from the first three years of the market. Take Guoxin Securities as an example, 32 of the 59 gem projects that took place by the company occurred before 2013, and the total cost of sponsorship underwriting amounted to 1 billion 190 million yuan, accounting for more than 60% of the total project fees in ten years.

There are, of course, individual counterexamples. For example, GF has only 16 gem projects before 2013, compared with 39 After 2014, with a total revenue of 1 billion 373 million yuan, accounting for 73.15%.

Some analysts pointed out that this is in connection with GF Securities's involvement in Suzhou's long-standing case at the initial stage of the growth enterprise market. At that time, Suzhou's IPO was revealed by the newspaper investigation report that the patent status was inconsistent with the actual situation and eventually aborted. GF Securities was the sponsor of the project, and was subsequently supervised by the SFC.

"GF has been in the market since the start of the gem, because Suzhou's long standing case has been affected to a certain extent." An investment bank close to GF Securities said, "however, after the IPO re opened in 2014, GF began to make great efforts to do gem projects."

In the industry's view, as the head of the securities investment bank team to undertake large projects, and the growth enterprise market is located in the growth stage, which provides opportunities for some front-line and non line brokerages to rise in the field.

"On the total plate of stock investment banks, CITIC and CSC are usually the first ones, but on the growth enterprise board, they are relatively inferior or non front-line brokerages occupy the leading edge." "This aspect is not related to the resources of major projects such as state-owned enterprises and banks, but also related to the established strategies of these brokerages in growth companies," said a non bank financial analyst of a medium-sized brokerage in Beijing.

Short board of punishment

According to the insiders, under the institutional arrangement of the gem, at that time, the regulators' punishment for events such as Suzhou's everlasting and Wanfu Sheng Ke was still "lifted to a higher level" to a certain extent relative to its violation of the plot.

Take the case of Suzhou as an example, at that time, the patent information disclosure of the company had been completed before it was issued, and the issuer and sponsor's GF Securities were only required to return the relevant funds after the incident. However, GF Securities was only taken the administrative supervision measures issued by the warning letter, and did not escalate to the level of administrative penalty.

"If we simply suspend a few months' qualification or make a penalty, it will be too low for listed companies and brokerages to play a deterrent role." A broker who is close to the regulatory level pointed out that "there are still some sponsors in the process of cooperation with the listed companies in the depth of binding, contrary to the fairness and neutrality of intermediaries."

In the industry view, in the future registration system reform process, we should further improve the penalties for illegal listed companies and intermediaries.

"Under today's supervision, the degree of fraud of the Wanfu branch can even be forced to withdraw from the market, and intermediaries' investment banking qualifications can be revoked." The aforementioned investment bankers close to the regulators said, "in the reform of the gem registration system to be explored, we should further increase penalties for illegal companies and institutions through legislation, so as to achieve the goal of optimizing the quality of listed companies and protecting investors."

It is worth mentioning that these proposals have been mentioned by the SFC today in the key work of deepening the capital market: "further increase the supply of the rule of law." We should speed up the revision of the securities law and criminal law, and substantially increase the illegal cost of fraudulent issuance, false information disclosure by listed companies and false testimony documents provided by intermediaries. We should make good use of the existing legal system, persist in strict law enforcement, and enhance the regulatory deterrent. "

"Raising the irregularities of intermediary agencies such as investment banks may not be difficult to anticipate in the future registration system reform of gem, which will also create a new investment bank ecosystem for the next ten years," he said. The aforementioned non bank financial analyst admitted.