Two new three-board companies, Jiangsu Beiren and Jindalai, recently announced that they would apply for listing on the Science and Technology Board, and the share price of related concept companies rose. The China Securities Journal reporter learned from many parties that at least nearly 50 new three board companies are considering trying to apply for listing on the science and technology board. Many of these companies contain “three types of shareholders”. However, from the positioning of the science and technology board and the relevant rules and guidelines, the threshold for listing on the science and technology board is high, so many new three board companies still need a lot of “cultivation of internal strength”.

"Three types of shareholders" are concerned

“Three types of shareholders” refers to contractual private equity funds, asset management plans and trust plans. Because “three types of shareholders” may have multiple levels of nesting and high leverage, as well as opaque and difficult to penetrate shareholder status, “three types of shareholders” has become a major obstacle for many new three board companies to apply for IPO.

In 2018, the CSRC first identified the “three types of shareholders” IPO auditing standards, and proposed four “hard conditions” for the IPO enterprises of the New Third Board: First, the controlling shareholder and actual controller of the company may not be “three types of shareholders”; It is required to be included in financial supervision. Third, it is necessary to propose a rectification plan that meets the requirements, and to make penetrating disclosures, and to require intermediaries to check the interests of stakeholders in the “three types of shareholders”; The “three types of shareholders” make reasonable arrangements for the duration.

From the follow-up situation, some enterprises' “three types of shareholders” enter from the market-making transaction, and there are many problems such as nesting, complicated penetration and high cost. For example, the Hairong Cold Chain is dealing with the “three types of shareholders” problem. The IPO process has been delayed for several years. The Yitong Culture and Education has terminated the IPO process because of the high cost of cleaning up the “three types of shareholders” and ultimately unable to negotiate.

According to the provisions of the “Stock Listing Rules of the Stock Exchange of Shanghai Stock Exchange”, a contractual fund, trust plan or asset management plan that holds more than 5% of the shares of a listed company shall disclose the subject of the voting rights of the controlling shares in the equity change document. And whether the entity has a relationship with the controlling shareholder and actual controller of the listed company. Where a contractual fund, trust plan or asset management plan becomes the controlling shareholder, the first largest shareholder or the actual controller of a listed company, in addition to fulfilling the obligations stipulated in the preceding paragraph, it shall also be disclosed to the final investor in the equity change document.

Zhu Weizhen, chairman of Zhongkewotu Fund, said that from the relevant content of the above rules, Science and Technology Board has relaxed the information disclosure and penetration requirements for “three types of shareholders” as long as the “three types of shareholders” share less than 5 %, penetration and disclosure requirements will be reduced. A new three-board company that has lost its IPO due to "three types of shareholders" told the China Securities Journal that the company is highly concerned about the relevant policies of the Science and Technology Board and does not rule out the application for listing on the Science and Technology Board.

Screening targets need to be cautious

In addition to the “three types of shareholders”, Zhu Weizhen pointed out that in the relevant rules and guidelines of the science and technology board, the implementation of the registration system allows unprofitable companies to go public, liberalize the listing of listed companies, and restrict the competition of the same industry than the A-share IPO. Less factors will bring some opportunities to many new three-board companies.

From the current situation, some of the new three board companies are popular in the market. Since the beginning of January this year, the stock prices of Western Superconductor, Betray, and Chengda Bio have been rising all the way, and the starting point of the stock price has basically been synchronized with the launch of many policies of Science and Technology. The market speculates that these companies may apply for listing on the Kechuang board in the future.

In the investment thinking of the New Third Board, “philately” based on cross-market valuation arbitrage has been a strategy adopted by many investors. Some market participants said that the science and technology board was established, and some institutions investing in the new three board companies had a potential exit channel. However, there are not many new three board companies with the conditions for listing on the board. “Emerging strategic industry quality enterprises with independent intellectual property rights and 'hard technology' and advanced technology can hope to land on the science and technology board. From the practice of 'philatelic' in the past few years, the probability of success of individual investors is very low. Carefully screen to avoid blindly following the hype."

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