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The China Securities Regulatory Commission (CSRC) announced on Sunday that any company deciding to set its IPO price to earnings (PE) ratio higher than that of industrial peers in the secondary market will be required to publish repeated risk warnings prior to opening subscriptions to retail investors. This measure is seen to effectively reduce IPO prices and at the same time slow down the progress of new issues.
A day after the CSRC issued their notice that it would strengthen its supervision of new listings, five Chinese firms on Monday announced that they had postponed their initial public offerings (IPOs). The companies are NetPosa Technologies Ltd, Hebei Huijin Electromechanical Co Ltd, NSFOCUS Information Technology Co Ltd, Beijing Forever Technology Co Ltd and Ciming Health Checkup Management Group Co Ltd.
In its announcement, Ciming Health said that in line with the Jan. 12 statement of the CSRC, the issuer and lead underwriters have chosen to adjust the company's timetable for planned share issuance. Statements made by the four other companies were on a similar note.
The drug maker Aosaikang had also made a similar statement on Friday to postpone its IPO, which according to sources was due to regulatory pressure. This postponement, however, was denied by the CSRC.
The six companies that have decided to postpone their IPOs make up around one fifth of the total number of companies which have filed to list in Shanghai and Shenzhen since the resumption of IPOs in early January. Ernst & Young has estimated that these companies will raise about 200 billion yuan (US $33.05 billion) on the Chinese stock exchange in 2014.
The suspension of the IPOs by these 6 companies seems to mark a bleak beginning to the reopening of IPOs in China, which regulators hoped would be a possible source of fresh funds for close to 750 companies.
