Innovative companies, including unicorns, have entered into A-shares or issued CDRs (vouchers) policies, which are faster than expected.
On March 30, the General Office of the State Council issued a notice stating that the CSRC’s “Several Opinions on Piloting the Issuance of Stocks or Depositary Receipts for Innovative Enterprises” has been approved by the State Council, and has been submitted to the people’s governments of various provinces, autonomous regions and municipalities directly under the Central Government, ministries and commissions of the State Council, and Agency forwarding.
The "Several Opinions" proposes to carry out pilot projects for the issuance of stocks or depositary receipts in innovative enterprises in accordance with the principles of marketization and rule of law. Pilot enterprises should be in line with national strategy, master core technology, and have high market recognition. They belong to high-tech industries and strategic emerging industries such as Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, biomedicine, etc. And reach a considerable scale of innovative companies.
The "Several Opinions" also set a threshold for pilot enterprises: among them, large-scale red-chip enterprises that have been listed overseas, with a market capitalization of not less than 200 billion yuan; innovative enterprises that have not yet been listed overseas (including red-chip enterprises and domestic registration) Enterprise), the business income in the most recent year is not less than RMB 3 billion and the valuation is not less than RMB 20 billion, or the operating income is growing rapidly. It has independent research and development, international leading technology, and is in a comparatively advantageous position in the competition of the same industry.
The following are the top ten highlights of the "Several Opinions" compiled by the journalists:
First, which industries are covered by the pilot companies?
The scope of the enterprise targeted by the pilot is undoubtedly the focus of the market. The document clearly states: "The pilot enterprises should be in line with national strategies, master core technologies, and have high market acceptance. They belong to high-tech industries such as the Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, biomedicine, etc. Strategic emerging industries and reaching a sizeable number of innovative companies."
The track has been well-planned, including the Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, biomedicine and other industries.
Obviously, "technology, innovation" is the key word. As early as January 30, at the 2018 supervision work conference held by the China Securities Regulatory Commission, it was proposed to increase support for new technologies, new industries, new formats, and new models, and accelerate the improvement of the capital formation mechanism that supports technological innovation. The specific industry delineation of this pilot is indeed in line with the "four new" concept put forward by the CSRC.
Second, is there any requirement for the scale of the pilot enterprise?
For “equal scale”, the document also gives specific data requirements from the aspects of valuation and market value.
For large-scale red chip companies that have been listed overseas, the market value is not less than 200 billion yuan.
For innovative enterprises that have not been listed overseas, including red-chip companies and domestic registered enterprises, the operating income in the most recent year is not less than RMB 3 billion, and the valuation is not less than RMB 20 billion, or the operating income is growing rapidly. With independent research and development, international leading technology, the industry is in a comparative advantage.
澎湃News reporter reported on March 1 that from the investment bank, the CSRC has helped the new economic enterprises to land in the capital market, mainly including three dimensions. First, large-scale enterprises with strategic value that have been listed overseas; Second, it has not been listed in China and abroad, but has already built a VIE-structured unicorn enterprise; the third is a “four-new” enterprise that has registered in the territory but has not yet listed and has industry development value.
Judging from the content of the documents, the selection of pilot enterprises does meet these three scopes. The above-mentioned investment bankers told reporters after the publication of the document that the current requirements are more detailed than originally understood, and setting a threshold for operating income, not just from the perspective of valuation, means that if it is only a high valuation, A company that does not have real materials does not meet the requirements, reflecting the regulatory requirements for the true operational capabilities of the company.
It is worth mentioning that the "Several Opinions" did not make specific requirements for the profit indicators of the pilot enterprises. In the past, an important reason for domestic technology companies to go public overseas was that they were losing money when fashion.
Third, who will choose the pilot enterprise?
The action of selecting a pilot enterprise will be carried out by two teams, and the committee composed of experts and the CSRC will be the gatekeepers.
According to the document, the CSRC will set up a scientific and technological innovation industrialization advisory committee to give full play to the role of relevant industry authorities and experts and scholars, and strictly select pilot enterprises.
The composition of the advisory committee includes authoritative experts in relevant industries, well-known entrepreneurs, and senior investment experts.
The selection process will take into account factors such as business model, development strategy, R&D investment, new product output, innovation capability, technical barriers, team competitiveness, industry status, social impact, industry development trends, corporate growth, and estimated market capitalization.
From the process point of view, the advisory committee makes a preliminary judgment on whether the applicant enterprise is included in the scope of the pilot, and then the CSRC will review whether the applicant enterprise is included in the pilot program, and accept the application for listing and listing of the pilot enterprise in strict accordance with laws and regulations.
Fourth, how are these companies listed?
Since the pilot companies are divided into different types, the listing methods are not the same.
The so-called red-chip enterprise refers to an enterprise whose registered place is overseas and whose main business activities are in the territory. Among the red-chip companies, if they are already listed overseas, the CSRC will allow the pilot enterprises to issue depositary receipts in the domestic capital market in accordance with the procedures, that is, the recent hot CDR method.
For red-chip companies that have not yet been listed overseas, if they have the conditions for listing shares, they may apply for listing shares in China.
The third type of enterprise is a pilot enterprise registered in China, and can apply for listing of shares in China.
5. How is the CDR issued?
Depositary receipts refer to securities issued by the depositary and issued in China on the basis of overseas securities, representing the interests of overseas basic securities.
The depositary receipts of the stock-based securities issued by the pilot red-chip enterprises shall comply with the basic conditions of the securities law regarding the issuance of shares, and meet the following requirements:
First, the ownership structure, corporate governance, operational norms and other matters can be applied to the laws and regulations of overseas registration companies, etc., but the arrangements for the protection of investor rights should generally be no less than the domestic legal requirements;
Second, if there is a difference in voting rights, a protocol control structure or similar special arrangements, it should be fully disclosed in the public offering documents such as the prospectus, and the relevant information, especially the risks, corporate governance and other information, and the implementation according to law. Measures to protect the legal rights and interests of investors.
6. Does the pilot enterprise enjoy regulatory benefits?
the answer is negative.
The issuance of stocks by domestic pilot enterprises shall comply with the conditions for the issuance of shares as stipulated by laws and regulations. Among them, the pilot red-chip enterprise's shareholding structure, corporate governance, operational norms and other matters can be applied to laws and regulations such as the company law of overseas registration, but the arrangements for investor protection should be no less than the domestic legal requirements. For pilot enterprises that have a protocol control structure, the CSRC will distinguish different situations from relevant departments and handle them in a prudent manner according to law.
More importantly, the pilot companies do not enjoy the “innocent gold medal”.
The document pointed out that the pilot companies issuing stocks or depositary receipts in China also need to be examined and approved by the issuance audit committee, and subsequent related issues of issuance, listing and trading are included in the scope of the current securities law.
Not only that, the CSRC will also implement supervision in accordance with the Securities Law and this opinion and related regulations, and establish a regulatory cooperation mechanism with the securities regulatory authorities of relevant countries or regions such as the pilot sites of pilot red-chip companies to implement cross-border supervision.
7. How does the depositary receipt correspond to the stock?
The depositary receipts represent the equity of the underlying securities in the country. Then, how many stocks does a voucher represent? How will the investor enjoy the shareholder treatment after purchasing the certificate? The document does not introduce it in detail, but mentions: "The specific requirements and methods for the conversion between depositary receipts and underlying securities are prescribed by the CSRC."
Some insiders told the 澎湃 journalists that this means that the future SFC will formulate more detailed operational methods.
Eight, how do the pilot companies approve?
For information disclosure, the CSRC requires that the relevant information disclosure obligors such as the pilot enterprise and its controlling shareholder and actual controller should disclose the information truthfully, accurately, completely, promptly and fairly, without false records, misleading statements or major omissions.
In particular, for pilot red-chip companies, the document stipulates that information disclosed overseas should be disclosed in Chinese in a timely manner, and the disclosure should be consistent with the disclosure in the overseas market.
9. How can an investor's rights be protected if the company is not profitable?
Article 8 of the document specifically deals with investor protection: “The pilot enterprise shall not have any special arrangements or actions that harm the legitimate rights and interests of domestic investors.”
Among them, the controlling shareholder, actual controller, directors and senior management personnel of the unexplored pilot enterprises shall not reduce the shares held before the listing before the enterprise realizes the profit. This undoubtedly avoids the situation that some investors are worried about the large shareholders relying on the valuation of “cutting the leek”.
In addition, the place where the CDRs are registered and the place of listing are outside the country, which means that the investors are also divided into two groups, both domestic and overseas. The document also stipulates that when the legitimate rights and interests of investors are damaged, the pilot enterprises should ensure domestic investors. Obtain compensation comparable to that of foreign investors.
10. What laws and regulations should be adopted by pilot enterprises?
The stocks or depositary receipts issued by the pilot enterprises in China shall be listed and traded on the domestic stock exchanges, and shall be registered and deposited and settled in China Securities Depository and Clearing Co., Ltd. The funds raised by the pilot enterprises can be remitted abroad in the form of RMB or foreign exchange purchases, or they can be retained for domestic use. The use of funds raised by pilot enterprises, dividend distribution of depositary receipts, etc. shall comply with relevant regulations on foreign investment and foreign exchange administration in China.
If the relevant market entities such as pilot enterprises issue securities in violation of laws and regulations and fail to disclose information according to regulations, if the disclosed information has false records, misleading statements or major omissions, or there are other illegal acts such as insider trading and manipulation of the market, they shall be in accordance with the securities laws. Legal obligations are stipulated by laws and regulations.
If the relevant market entities such as pilot enterprises cause damage to the legitimate rights and interests of investors, they shall be liable for compensation according to law, and investors may directly demand that they bear the liability for damages according to law. If the depositary or custodian violates this opinion and the relevant provisions of the CSRC, the CSRC may take regulatory measures according to law and pursue its legal responsibilities.