The China Securities Regulatory Commission (CSRC) is stepping up inspections of companies seeking initial public offerings.
The aim is to stimulate the secondary market and slow the pace of new fundraising as regulatory action, including the seizure of senior executives' phones and laptops, has led a growing number of companies to withdraw their IPO applications.
The China Securities Regulatory Commission said in April it would conduct inspections of 20% of companies hoping to go public in 2024, four times its target from last year. The commission, which tightened regulations in March, reportedly wants to ensure that only top-tier companies — those favored by the Beijing government — have access to China's capital markets.
The country's largest stock exchanges, in Shenzhen and Shanghai, are not accepting any IPO applications this year.
The data showed that more than 130 Chinese IPO candidates have called off their listing plans for 2024. Swiss agriculture giant Syngenta, for example, called off its $9 billion IPO in Shanghai.
While China's on-site benchmark figure has risen 7% this year, total funds raised through initial public offerings fell nearly 90% in the first four months to $2.6 billion, the lowest level since 2013.
Officials from the CSRC and local stock exchanges are now visiting the offices of IPO applicants and requesting reviews of business and personal documents to assess their financial soundness and governance.
Similarly, underwriters for potential IPOs must be present and prepared to face questions from regulators and stock exchanges. But this increases the risk that banks and brokerages will be embroiled in regulatory issues for their clients. In some cases, bankers may have to put away their computers and mobile devices to avoid being kicked out of the IPO or losing their jobs.
In February, the CSRC fined Shanghai semiconductor company S2C for fraudulent practices in its listing application, despite the company cancelling its IPO scheduled for July 2022.
The IPO curbs are hurting the outlook for investment banks and professional services firms. Equity-related underwriting fees in China fell 77% from the previous quarter to $301 million, the lowest since 2009.
