Refinancing Core Provisions Deregulation Efforts Are Expected To Increase Into The "Golden Pit" Era Of High Discount

Flowers are becoming more attractive. After proposing a comprehensive deepening of the capital market reform, the SFC has loosened the refinancing regulation which has been tightened since 2017.

On November 8, China Securities Regulatory Commission (CSRC) solicited public opinions on the revision of refinancing rules such as measures for the administration of securities issuance of listed companies and Interim Measures for the administration of securities issuance of GEM listed companies.

The change of the refinancing policy is divided into three main lines: first, optimize the relevant policies of the gem refinancing, second, issue the rules of the Sci-tech Innovation Board refinancing, and finally, and most importantly, loosen a number of provisions on tightening the refinancing in 2017, such as lock-in period and discount strength.

Fixed increase in "golden pit" era

After canceling the backdoor restriction of gem, the regulators optimized the original refinancing system of gem: cancelled the regulations on the non-public issuance of gem for two consecutive years of profitability and the basic use of the previously raised funds, and cancelled the regulations on the public issuance of gem for the asset liability ratio of more than 45% at the end of the latest period.

"In recent years, gem has no public issuance, so this revision has little impact on the public issuance. However, due to the outbreak of goodwill impairment in 2018, many GEM companies suffered significant losses in 2018, which did not meet the conditions for non-public issuance. After this revision, these companies will regain the right to non-public issuance. At present, 171 of the 789 GEM companies fail to meet the requirements of two consecutive years of profitability, and those companies with such losses but financing needs benefit relatively. " Ren Lang, research analyst of open-source securities in small and medium cap, thinks.

In addition to the refinancing of gem, this policy adjusts the pricing and lock-in mechanism of non-public issuance of shares, changing the issuance price not to be lower than the average price of the company's shares on the 20 trading days prior to the pricing benchmark date by 10% to 8%; reducing the lock-in period from the current 36 months and 12 months to 18 months and 6 months respectively, and does not apply the relevant restrictions of the holding reduction rules.

Ren Lang believes that after the new regulation, the discount rate is expected to increase, and the high discount arbitrage strategy will be restarted to enter the "golden pit" era. "Historically, the discount rate is the core source of the systematic income of the fixed increase market. After the implementation of the revised new rules, there will be a very good opportunity for high discount arbitrage in both fixed price increase and fixed price increase. In the future, the fixed price increase market will enter the era of "gold pit" with high discount as the core. "

He further analyzed that, taking the fixed price increase as an example, after this revision, the fixed price increase can also lock up the price in advance and the discount rate will be increased to 20%, the lock-in period will be shortened to half from the original three years, and the reduction will not be limited. Even if only considering the yield brought by discount rate, the annual yield of fixed price increase can reach 16.7%, and the opportunity of high discount arbitrage is obvious.

As for the fixed price increase, Ren Lang expects that a discount of 20% will attract many investors, and the discount rate will not be too high under the market-oriented quotation. But at present, the fixed increase market is in a situation where supply is far greater than demand. It needs a certain period of time for funds to enter the market, so the discount rate of fixed increase by bidding in the short term will remain high, and the lock-in period is only six months, so there is a very good opportunity for high discount arbitrage.

Focus on old and new critical points

However, some institutions also suggest that we need to take a cool look at the opportunities brought by this policy change, which may be quite different from the fixed growth market before 2017.

Liu Kaiyun, general manager of the investment increasing center of the Kowloon Thai investment fund, said: "increasing investment is more essential than the previous extensive profit model. As a medium and long term proactive investment behavior with a holding period of at least 6 months, the key to determining the investment return is still the unique competitive advantage of the enterprise relative to its competitors and the sustainable profitability and growth potential resulting from it. While paying attention to the increase of discount space and exit facilitation brought about by policy revision, we should examine the quality of operation of listed companies from the basic dimensions, and select genuine high-quality listed companies to participate in fixed investment, rather than blindly optimistic and cater to market hot spots. The growth of quality companies should be accompanied by the protection of the margin of safety provided by the discount, so as to strive for a more robust return on investment.

In addition, the organic structure will aim at some of the targets at the new and old critical points.

"The CSRC stipulates that when the revised refinancing rules are issued and implemented, the revised new rules shall be applied to those that have not been approved and approved by the CSRC. Therefore, companies that have issued refinancing plans but have not yet obtained approval from CSRC have benefited relatively. At present, there are 369 companies that have issued refinancing plans for A-share, 290 of which have not been approved by the CSRC, and the financing scale involved is more than 491 billion yuan. These companies deserve attention. " Cao Gang, Ze Hao's investment partner, told reporters.