New over-the-counter board to help startups raise funds

A stock investor shares glad tidings with her friend. The new over-the-counter board, or N-board, is expected to help build a multiple-layer capital market in the country.[Provided to China Daily]

A new over-the-counter board, or the N-board, will be launched today in Shanghai for startups. The high-tech channel will help startups to raise funds as part of a nationwide campaign to encourage entrepreneurship and innovation.

The Shanghai Equity Exchange, the city's OTC board operator, said it approved the launch on Nov 20. Since then, more than 50 enterprises have applied to get listed on what has come to be also known as the "technology and innovation" board.

Analysts said the launch is part of the country's efforts to build a multiple-layer capital market, which will aid growth of small- and medium-sized firms, and increase investment channels for investors.

More than 20 enterprises are expected to be listed on the N-board today, many of which are based in Shanghai's Zhangjiang Hi-Tech Park, a hub for innovative companies and research-and-development centers of domestic and multinational corporations.

There are already three layers of share trading systems on the Shanghai and Shenzhen bourses: the main board for established companies, the SME board for small- and medium-sized enterprises, and the Nasdaq-style ChiNext board for startups.

Haitong Securities Co Ltd said in a research note: "The launch of the N-board has been anticipated for a long time." The N-board, it said, will ease funding for growth-seeking enterprises and help them to grow fast in a short time.

It will also prove a big help for innovative companies as the timing of the launch of new products is key to their survival and growth. Small private companies that do not have enough collateral for bank loans and cannot afford to wait in the IPO (initial public offering) queue, will find in the N-board a much-needed alternative, the Haitong Securities note said.

Chen Yan, director of innovation at the SEE, said the N-board will be different from the existing ChiNext small-cap growth board in Shenzhen in that the startups will be listed based on their disclosures, a requirement that is somewhat akin to that of the registration-based system.

He said there are no requirements that startups seeking to list on the N-board must be profit-making. But they must demonstrate potential for growth.

Companies that have already received the backing of angel investors and those looking for Series A investment may want to consider listing, he said.

Startups that have assets worth 500,000 yuan ($79,365) and above could list on the N-board, said Chen. The low level of minimum asset requirement is expected to make it easier for a large number of startups to enter the market.

N-board stock price movement will be subject to 50 percent daily limit to protect investors. During the early days of N-board trading, only institutional investors will be allowed to trade, according to the SEE.

Authorities said that the N-board will serve the needs of micro and small enterprises focusing on innovative technologies and professional services across fields like high-tech displays, robotics, Internet, big data, cloud computing, Internet-based financial services and credit services.

Li Jun, deputy head of the Shanghai Municipal Financial Services Office, said that N-board-listed companies that perform well, turn profitable and meet the bourse's requirements, could look forward to rewards like promotion to the ChiNext, the SME board and even the main board.

Analysts said the N-board may benefit brokerages too in the long run. A research note of Sinolink Securities said the N-board requires more institutional investors' involvement in risk management, valuation and other professional functions in share trading.

A more active multi-layered capital market will boost demand for brokering services, said the research note.