China Securities Regulatory Commission Plans To Revise Gem IPO Pricing Mechanism To Promote Game Equilibrium Between Buyers And Sellers

Under the registration system, "group quotation" has aroused regulatory concern.

In order to further optimize the underwriting system of new share issuance under registration system, promote a more balanced game between buyers and sellers, and promote the effective role of the market-oriented issuance mechanism, the China Securities Regulatory Commission (CSRC) proposed to amend individual provisions of the special provisions on the issuance and underwriting of initial public offerings of securities on the growth enterprise market (hereinafter referred to as the special provisions) on August 6, and solicited public opinions from the public.

In terms of the revised contents, the CSRC intends to optimize the "special provisions" appropriately, cancel the requirement of linking the IPO pricing with the subscription arrangement and the number of special announcements of investor risk, balance the interest relationship among issuers, underwriting institutions, quotation institutions and investors, promote game equilibrium and improve the issuance efficiency.

Wang Jiyue, a senior investment banker, said that on the one hand, the amendment reflected the regulatory concern on the issue of new share pricing under the registration system, on the other hand, it did not change the overall trend of new share pricing, but was more cautious in revising“ It will increase the game space, and the quotation may not be so centralized. "

It is planned to cancel the requirement of linking IPO pricing and subscription arrangement on GEM

In recent months, the A-share market under the registration system has frequently produced "three low" new shares with low issuing price, low P / E ratio and low fund-raising amount.

In July, Zhengyuan Dixin, which plans to be listed on the science and technology innovation board, attracted 10534 placing objects managed by 503 offline investors in the inquiry. However, according to the statistics of 21st century economic report, according to the preliminary inquiry and quotation information, 9923 placing objects without exception gave the declared price of 1.97 yuan / share, accounting for 94.19%. Such a high proportion and high concentration of inquiry results also made Zhengyuan Dixin's final pricing stop at 1.97 yuan / share.

Coincidentally, on July 19, the reader culture listed on the gem was also issued at a "super low price" of 1.55 yuan per share. Compared with the company's "dismal" issuance price, the reader culture was sought after by a large number of investors on the first day of listing. After only 10 minutes of opening, it triggered two consecutive temporary stops, and the company finally closed up 1942.58% on that day.

"Some offline investors pay more attention to strategy than to research, and are shortlisted for" group bidding "to interfere with the issuance order The relevant person in charge of the CSRC said on August 6.

In terms of strengthening the supervision of new share pricing, the Shanghai Stock Exchange has already made its sword clear. On July 9, the Shanghai Stock Exchange made a decision to give supervision and warning to six institutions because the above-mentioned institutions violated the rules in the process of off-line inquiry. This is also the first time that the stock exchange has imposed punishment on the IPO offline inquiry. The six institutions mentioned above are the risk of key information disclosure such as price, lack of internal control procedures for quotation, and insufficient basis for pricing process.

In the special provisions, the CSRC intends to cancel the requirement of linking the subscription arrangement of IPO pricing and the number of special announcements of investors' risks, and plans to delete the relevant provisions on the range of issuance price of accumulated bidding inquiry.

The revised terms and conditions are as follows: if the inquiry method is adopted and one of the following circumstances exists, the issuer and the lead underwriter shall issue a special announcement of investment risk before online subscription, detailing the rationality of pricing and reminding investors to pay attention to investment risks:

First, the corresponding P / E ratio of the issuing price exceeds the average p / E ratio of the secondary market of comparable listed companies in the same industry; Second, the issuing price exceeds the median and weighted average of offline investors' quotation after excluding the highest quotation, and the lower of the median and weighted average of public offering fund, social security fund, pension fund, enterprise annuity fund and insurance fund after excluding the highest quotation; 3. The issue price exceeds the overseas market price; Fourth, the issuer has not yet made profits.

According to the CSRC, the move is to further optimize the underwriting system for new share issuance under the registration system, promote a more balanced game between buyers and sellers, promote the effective role of the market-oriented issuance mechanism, better play the decisive role of the market in resource allocation, and serve the high-quality development of the real economy.

There is still room for follow-up IPO pricing system reform

"At present, the design of new share pricing system makes it impossible for issuers, lead underwriters and investors to compete equally." In the view of market participants, there is still room for further improvement in the new share pricing system under the registration system after the amendment of the special provisions.

The investment banking committee of China Merchants Securities said that under the influence of pricing rules such as "excluding 10% high price" and not exceeding the lower value of "4 numbers" to determine the issue price, the game of offline investors' quotation focuses on improving the shortlisted probability of new stock quotation, rather than analyzing the future investment value of the company to be issued and quoting according to the investment value, resulting in the phenomenon of "group" price reduction, On the surface, it is the abnormal behavior of new stock quotation, but in fact it is the inevitable result of the interweaving of investors' wrong ideas and pricing rules, which is not conducive to the formation of a reasonable market price.

Southern Fund also believes that the quotation logic of inquiry market has the phenomenon of group quotation and relatively low price. This is mainly due to the profit-making effect of new shares, which leads to the primary goal of institutional bidding strategy, and the decentralized pricing mechanism leads to the "light research, more communication" behavior. In addition, at present, the supply of new stock market is sufficient, and it is still a buyer's market in the short term, and the issuers and sponsors have no pricing influence.

Therefore, China Merchants Securities suggests to optimize the new share pricing system under the registration system, and increase the space for each market entity to play games with each other. Specifically, we can optimize the formation mechanism of the issue price according to the latest market situation, remove the regulation of "excluding 10% of the highest quotation", allow the sponsor to break through the potential restriction of "four numbers", and independently negotiate with the issuer to determine the issue price through sufficient market inquiry and on the basis of certain subscription multiple and pricing coverage.

In addition, Huatai Securities believes that in order to improve the status quo of price reduction of institutions, it is also necessary to gradually return the right of placement of new shares to the market.

"In the offline placement process, at present, the new share placement still adopts the mode of classified proportion allocation, that is, the same proportion of the same category of objects is allocated according to the proportion of their subscription amount. Under the background that the number of offline allotment objects is more than 10000, the amount allocated to a single object is very small, which reduces the enthusiasm of investors in price discovery." Huatai Securities believes that in the process of IPO pricing, investors who understand the value of the company should establish corresponding compensation and incentive mechanism, which can give more allotment than when the price is the same, and reduce the possibility of investors with professional pricing level concealing their actual views on the company.

"However, the amendment of the system also means that the regulation has paid attention to the issue of IPO pricing, which in essence paves the way for the follow-up reform." Beijing area head securities investment bank said.

?