 |
Zero2IPO Exclusive |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
The global economy is more or less declining due to the influence caused by American subprime mortgage crisis and economy recession. The weak performance of the global capital markets has posed negative impact on domestic market, where many IPO events have been cancelled or postponed. This, to some degree, discouraged both investors and investment institutions. In this context, Zero2IPO hosted its 60th Z-club event: Overseas Listing of PRC Enterprises: Opportunities, Challenges and Tactics, where a host of experts at stock exchanges and intermediaries rich in overseas listing services, entrepreneurs, and investors share their precious experiences and opinions on recent listing pattern of Chinese enterprises together. The Conferrees (Arranged in Alphabetical Order):
Executive Summary: I. Listing Requirements Guangxun Xu: Among 3,200 companies traded on NASDAQ, there are 59 Chinese ones. The listing requirements for enterprises to debut on the NASDAQ national market specify as follows: Net assets reaches US$15M, and pre-tax profits US$1M; at least 1.1 million shares are issued; market value is required to be no lower than US$8M; the number of shareholders is at least 400; when the stocks are traded, the issue price should not be lower than US$5; and three market makers are necessarily required. NASDAQ will offer varied services for quoted companies after or before their listings, which are dependent on real conditions. Guangming Ren: The Hong Kong Stock Exchange is made up of the Main Board and GEM market. On the Main Board, the overwhelming majority of mainland enterprises regarded "the consolidated profits generated from main business during the past three years amounted to HK$50M" as financial targets. Currently, the smaller-size HKGEM is amending its listing threshold, and new rules are expected to be released in the third quarter of this year. Pursuant to the new rules, it would be easier for companies to float from HKGEM to the Main Board. As long as they follow regular auditing procedures to file the Stock Exchange with a document proving it can meet the Main Board listing rules and meet the shareholders meeting approval, they can be qualified to float on the Main Board after releasing a formal notice. Nancy Jiang: There are four boards on London Exchange Stock, among which AIM - the Alternative Investments Market - is familiar to us. Since 2004 when we had AIM promoted in China, a total of 64 Chinese enterprises have listed there. There are no listing requirements on AIM. What's more, the maintenance expenditures and costs are quite flexible. Many large-scale companies are also willing to debut on AIM for the following two reasons. One is that major shareholders wish not to over-dilute the stakes they hold, as low as 20-25%. The other factor is that they are reluctant to disclose too much information. Mark Weeks: It will take much time and energy for companies to prepare audited financial statements as well as detailed introductive statements. In this context, companies ready for listing on NASDAQ should devote enough time to making necessary pre-IPO preparations. After companies initially submitted the files, the SEC will review them in the following three to four months, during which companies need to communicate regularly with the SEC and the NASDAQ to ensure all the papers they filed can pass through the regulatory requirements. Richard Eaton: There are a series of rules (for companies to obey) in the UK. But if you are able to illustrate those rules in another logic form or rationally prove that some rules are irrelevant to your company, you need not obey them. II. Where to Go Public? Andy Liu: One should consider the key future development fields apart from the industry the company lies in. To choose an oversea or domestic market, you should first consider the regulatory regime in China. It is basically disallowable for companies to go public by purchasing a shell company in the current legal system. Recently, the Ministry of Commerce together with other relevant departments is introducing a relative implementation bylaw; we estimate it will greatly promote the overseas listing. Jeff Wang: The primary issue to be considered is whether the market itself has sufficient liquidity. After taking into account a wide variety of advice by different consultants, the company's board of directors and management team will be responsible for comprehensive judgment or final decision-making. David Wu: Where to float your stocks is what counts. You need to resolve this issue as soon as possible. Once you set the listing market, you will choose proper cooperators and pursue operation strategy. For example, if we decide to take our business public on NASDAQ, we had better choose the law firms with international background. III. Why to Go Public? Basically, going public has three values. The first is to help companies get financed and refinanced. The second is to help shareholders cash out when appropriate. The last is for lifting brand and extending market. Some distinguished guests present at the Z-club event also disclosed other values brought by going public. Andy Liu: Going public offers staff an opportunity to receive incentive stock options and provides enterprises with a strategic tool to conduct acquisitions and reorganizations to further expand businesses. In essence, going public can gauge the entrepreneurship value in the real market. David Wu: The biggest attraction for enterprises to go public is to receive an accurate valuation, and this is very important for high-tech companies. Since listed companies have a fair valuation in the securities or quasi-securities markets, enterprises can realize going public is a good way to keep stock trading under control, you can choose a suitable time to use them and another suitable time to cash out. Jim Zhang: Some private entrepreneurs want to expand overseas market by acquiring a brand or setting up a new venture overseas. Nevertheless, foreign entrepreneurs will be hesitant to work for an insignificant private business from China. To address this concern, they will take their enterprises public in overseas capital market, thereby putting their strategic considerations into practice. IV. After the Listing Mark Weeks: After the listing, enterprises need to meet the financial regulatory requirements and improve business operations. They are subject to more stringent requirements in releasing financial reports, as well as work in other aspects. Nancy Jiang: Some enterprises only understand the advantages brought by going public but fail to comprehensively understand the relevant obligations and responsibilities. Others may be incompetent in their own management structure and staff placement. However, they meet the listing requirements set by stock exchanges, and they can be qualified for going public. Such issues are easy to appear after listing. I feel PE funds have been more mature and cautious in choosing which market to list, because they come to consider more about their liability after-listing. The misapprehensive problem will be easier to resolve in future. V. Hands-on Experience Jim Zhang: Management executives usually have little experience in choosing an intermediary to suit their company during the listing process. I propose they learn from listed companies, which can offer lots of precious experience. Given there is a 12-hour time difference between New York and Beijing, you need to clarify whether the wanted lawyer can be freely reached by phone, since a lawyer is important to an enterprise what a nearly personal doctor to a patient. When recommending intermediaries to our clients, we prefer to choose those with top lawyers, domestic and international. It will be better if they well know the demands and requirements of Chinese entrepreneurs. Andy Liu: How to make decision when you encounter a series of issues in the listing process? I suggest you can pick an excellent VC, because it can offer you valuable amenities, such as selecting suitable lawyers, accountants, and brokers, to expedite the overseas or domestic listing of your company. It is also of use to help you differentiate good proposals and bad ones. Ying Li: Enterprises might take much time to restructure themselves. However, according to the Labor Law of PRC, it is good for an enterprise to get itself reorganized if it plans to get listed. Only by restructuring does the enterprise have the possibility to reach a required standard. Gongwen Dong: The first essential step for a company is to establish a red-chip structure before it lists overseas. Some recent reports say that the CSRC will resume the red-chip review at once, but any change in policy is hard to be completed in one day or two. It is anticipated that it is likely to resume the review in five years. A great many Chinese enterprises used to have red-chip structure, but they need to improve the structure by conducting some restructuring work. It is advisable that enterprises should turn to attorneys and investment bankers for help with a view to doing well in the first essential step for overseas listing. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
