Pass Rate for Chinese IPO Applications Drops to 47.06% in First Quarter


The volume of IPO applications approved by the China Securities Regulatory Commission following examination has posted a sharp decline in the first quarter of 2018, as the authority tightens up its scrutiny of companies aspiring to list.

CSRC approved 32 out of 68 applications made by enterprises in the first quarter, refused a total of 32 and delayed a decision on another four companies, for an approval rate of 47.06% (not including cancelled reviews).

In sharp contrast the approval rate for 2017 was 77.87%, with 380 out of 488 enterprises whose applications underwent review securing the green light from CSRC.

Observers believe that regulators will continue to focus on strict quality control of companies planning to list, in order to prevent enterprises from “listing while sick” and thus raise the quality of A-share listed concerns.

Official data further indicates that the number of companies whose IPO reviews were terminated has increased, rising to a total of 66 in the first quarter, as compared to 175 for all of 2017.

The chief reason for the termination of reviews was poor business performance on the part of applicants, and in particular failure of net profits to reach the minimum threshold.

Tian Lihui (田利辉) from the Financial Development Research Institute of Nankai University said to China Securities Journal that CSRC’s IPO reviews had become more comprehensive, detailed and thorough, encompassing multiple indices including profit rates, accounts receivables, raw materials, sales channels, affiliate transactions, accounting methods, internal controls, core technology, equity issues and investment projects.

CSRC examiners are focusing more on the quality of enterprises, as well as financial report accuracy, compliance and internal controls, in order to “deeply analyse the sustainable profit-making capability of enterprises.”

IPO procedures are set to undergo further change with State Council’s approval and issuance of CSRC’s “Several Opinions on Undertaking Trials for Innovative Enterprises Issuing Shares or Depository Receipts Domestically”(关于开展创新企业境内发行股票或存托凭证试点的若干意见) on 30 March.

The Opinions provides systemic arrangements to support listing or share issuance on domestic bourses by tech enterprises, as part of efforts to draw leading Chinese companies listed abroad back to the A-share market.