Faster IPO approvals for unicorns

CSRC plans more steps to attract listings from innovative firms

The securities regulator has reportedly accelerated the approval of initial public offerings for technology and innovative companies in hopes of retaining future technological giants in the home market.

The regulator has shortened the IPO approval period for companies in four areas: biochemistry, cloud computing, artificial intelligence and advanced manufacturing, said Tencent Finance, the business media outlet affiliated with technology company Tencent Holdings Ltd, in a report on Wednesday, citing people with the knowledge of the matter.

The report said that the regulator has also loosened requirements on profitability and shareholding structures of the so-called unicorn companies (those with valuation of at least $1 billion) in the four industrial areas.

The China Securities Regulatory Commission did not respond to China Daily's inquiry on the matter on Thursday.

The report generated heated discussions in the industry over Chinese regulator's next move on IPO rule change as CSRC officials have vowed to make the country's IPO market more inclusive and more favorable for technology firms.

The faster-than-expected IPO process by electronics manufacturer Hon Hai Precision Industry Co Ltd, better known as Foxconn, to float shares in the Shanghai Stock Exchange, has also generated expectation for greater encouragement and regulatory support of IPOs from high-tech and emerging sectors.

While any major revamp of the current IPO rules would require the amendment of the Securities Law, analysts said that the regulator will need to improve the existing share offering system to better facilitate the fundraising needs of the country's innovative startups.

"The reform should focus on areas including giving the market greater say in IPO pricing, re-designing the regulatory arrangement to make the market more inclusive for innovative companies and granting stock exchanges greater power on reviewing IPO applications," said Dong Dengxin, a finance professor at Wuhan University of Science and Technology.

The stock exchanges on the Chinese mainland are facing greater competition from overseas bourses including those in Hong Kong and New York that are vying for technology IPOs from the Chinese mainland.

The Hong Kong Stock Exchange is expected to accept IPO applications under dual-class share structures soon and it will allow biotech companies with no profit or revenue to float shares on the bourse.

Zhang Shenfeng, assistant chairman of the CSRC, said earlier that the regulator will strengthen the capability of the capital market to serve the economy, in particular the high-tech and innovative sectors.

Accounting firm EY forecast in a report that the Chinese mainland market will accelerate to clear the strong IPO backlog and IPO funds raised in Hong Kong are expected to reach more than HK$200 billion ($25.6 billion) this year.