With the increase in the support for the listing of "Unicorn", the Chinese version of the Depositary Receipt (hereinafter referred to as CDR) is gradually approaching.
The China Securities Regulatory Commission issued the "Some Opinions on Launching Pilot Projects for Issuing Domestic Shares or Depositary Receipts within the Innovative Enterprise" at the end of March. After clearing the CDR as a unicorn listing support path, many large-scale PE institutions and intermediary agencies are in the right position. The details of the opportunities and policies are given attention.
A few days ago, 21st Century Business Herald reporter learned that many organizations believe that supervision will be expected to announce more policy details in the promotion of CDR.
On April 16th, Liu Lefei, chairman and CEO of China CITIC Industrial Fund, responded to an interview with this reporter. According to the information released at present, the launch of the CDR system has pilot points; but at the same time, he believes that the next step of the CSRC will announce more implementation details. .
Waiting for normalization
On April 16, an investment banker close to Xiaomi disclosed that while the company was listed in Hong Kong, it was also conducting research and promotion on the listing in the mainland through the CDR mechanism and contacted some intermediary agencies.
Multiple signals indicate that the CDR's window is approaching.
“Because the previous structure and legal preparations have always been reserved for listing in Hong Kong, it is more probable that CDRs will first be listed in Hong Kong,” said a person close to Xiaomi.
The trend of Xiaomi is not a case. A large securities company in Beijing has adopted a strategy.AnalystWhen interviewed, they pointed out that if the supporting policies and the market environment are stable, the project that will launch the CDR within the year will become a highly probable event, and investors’ expectations have also been formed.
Faced with the CDR's window expectations, different agencies are also strengthening their focus and grasp of this policy.
Liu Lefei believes that the promotion of the CDR system will bring more positive changes to the Chinese capital market.
"First of all, the CDR system has demonstrated its flexible and pragmatic side in the short term. Without breaking the "Securities Law," it has broken the restriction that foreign companies cannot directly list on A-shares, and shortened the return of new-economy enterprises. A share's time." Liu Lefei told reporters in the 21st Century Business Herald that this is in line with the current macroeconomic policy orientation that China urgently requires the capital market to support industrial upgrading and technological innovation.
According to Liu Lefei, the CDR mechanism also simplifies the traditional Back-to-A process such as “privatization-IPO or backdoor”. "Before the CDR trial, overseas listed companies need to be privatized overseas before returning to A-share IPOs or backdoors. The process is cumbersome, takes a long time, and has high uncertainty." Liu Lefei said.
The arrival of CDR will affect the valuation center of A-share stock companies.
"The increase in the issuance and circulation of stocks brought by the CDR has resulted in a higher market value of the unicorn enterprises and better fundamentals, and it is easy to attract more market funds to chase." A person in charge of a Beijing-based PE agency said: "Without incremental funds, Into the next, this may lead to a decline in the level of A-share bubble, but also make the potential return on investment in the primary market decline."
“It is foreseeable that the CDR system will bring about changes in the supply side for domestic securities issuance quantity and quality, and also provide more options for domestic investors to allocate new economic industries.” Liu Lefei also said, “but at the same time it will also give A shares existing shells. Companies, restructuring of the subject matter companies, and the TMT sector brought certain valuation pressures.”
The person in charge of the PE stated at the same time frankly stated that due to the initial stage of the CDR pilot project, the number of projects is scarce, and most PE institutions need to wait for the normalization of the system. "There are currently only 8 CDR pilot companies in the rumors. The participation of PE institutions is limited, but after this system is normalized, more and more exclusive beasts have the ability to be listed, and the opportunity for PE will come." The person in charge said.
Focus on detail design
Liu Lefei believes that the current CDR mechanism has a strong "pilot interest" and a high threshold.
According to the opinion, for large-scale red-chip companies that have been listed overseas, the market value of pilot companies must not be less than 200 billion yuan; and for innovative companies that have not been listed overseas, the operating income in the most recent year should not be less than 3 billion yuan. The value is not less than 20 billion yuan, or meets the conditions of “rapid growth of operating income, having independent research and development, leading international technology, and being in a relatively dominant position in competition with the industry”.
According to industry insiders, although this condition defines the threshold of “Unicorn”, conditions such as rapid revenue growth and international leading technologies are still ambiguous; therefore, it is not precluded that the follow-up of the regulator will introduce more detailed Implementing Regulations.
The above-mentioned strategist said: "Now, the lines for entry barriers are still relatively thick, and in specific operations, there may be more detailed standards."
Liu Lefei said that he believes that the SFC will announce more implementation details in the next step; in fact, the "Opinions" have indeed made it clear that the "specific standards" for pilot companies are set by the China Securities Regulatory Commission.
According to Liu Lefei’s expectations, the CDR’s stock conversion, financing functions, and trading mechanisms will all become possible implementation rules.
"In the medium to long term, whether CDR pilots can effectively land on the basis of regulatory intentions, achieve economies of scale and better liquidity, but also depends on the design of their implementation details, including the CDR's managed stock source, the ability to freely convert basic stocks, and Whether there is a financing function, whether there is a market maker, etc., these are worth the market to maintain sustained attention." Liu Lefei thinks.
As part of the reform of the supply side of the capital market, the CDR pilot will provide more experience and practices for market development.
Liu Lefei believes that “the introduction and practice of the CDR system is a positive step for China’s capital market supply side reform and a sign of further internationalization of China’s capital market. It can also provide meaningful empirical experience for China’s deeper reform of the issuance system. Theoretical thinking."