Focus

• The main difference between the secondary listing and the dual listing is the pricing power, and the market value difference is not too big, Dual main listing is the initiative defense action of Sinochem
• The large size makes Ali's actions more attractive, and he will not take the initiative to delist from the US stock market subjectively
• Ali's completion of dual listing will drive more enterprises to return to Hong Kong and promote the prosperity of Hong Kong's capital market

Overview

At the end of April, Zhihu officially opened the dual main listing channel of China Concept Shares. Three months later, Alibaba also announced that it applied to use Hong Kong as the main listing place.

Alibaba was listed on the New York Stock Exchange in September 2014, and its market value once reached 850 billion US dollars, becoming the wind vane of China Concept Stock. This layout is likely to further accelerate the speed of China Concept Stock's listing in Hong Kong.

What is the concept of dual primary listing? What is the difference between dual primary listing and secondary listing? Why did Alibaba announce dual primary listing at this time point? Can "landing in Hong Kong" really break the situation for enterprises and open a new stage?

At 20:00 on August 10, "See You" cooperated with Tencent Technology. In the fifth issue, Sheng Xitai, the founding partner and chairman of Hongtai Fund and the first chairman of Huatai United Securities, was invited to read the secret behind Ali's "dual main listing" live online.
 

The following is the essence of live broadcast:
 

01 The main difference between secondary listing and dual listing lies in the pricing power, and the market value difference will not be too big

Liu Xingliang: Ali has been on the Stock Exchange in 2019 「 Secondary listing 」 , and recent 「 Dual main listing 」 What's the difference?

Sheng Xitai: Before answering this question, let's share my understanding of the capital market - - "The infrastructure of a great power" is a great power's heavy weapon.

As a capital market, Wall Street ranks first in the world because the total economic volume of the United States is the first in the world; Since 2014, China's capital market has ranked the second in the world. In that year, our economic aggregate exceeded that of Japan and jumped to the second place. Therefore, the size and volume of the capital market are positively related to the level of economic development.

2014 was a historic year. Alibaba also completed listing on the New York Stock Exchange. At that time, Alibaba hoped to list in Hong Kong. The core issues at that time were: The Stock Exchange did not support different rights for the same shares in 2014, so Ali finally chose to list on the New York Stock Exchange 。

Returning to the difference between the secondary listing and the dual main listing, the secondary listing means that the listed subject is still in the original capital market. For example, the digital person corresponding to you in the secondary listing has no independent pricing power and has a dependency relationship; Under the dual main listing system, the two listings are exactly the same. "AB is equal to BA", and both have independent pricing power. One capital market is delisted, and the other capital market remains listed.

Liu Xingliang: We all know that after dual listing, Alibaba has become two independent individuals. How will Alibaba's market value be calculated in the future? Is there any connection between the stock prices of the two places? Will the gap become larger?

Sheng Xitai: There are both connections and differences. There must be a gap between the stock prices and market values of the two places.

The liquidity of the U.S. market is better. Normally, the trading volume of the same stock in Hong Kong is basically one-third to one-half of that in the United States. In this case, the pricing space will be different because the investors and investors are different.

There must be a gap between the price of the same stock and the market value and exchange rate after conversion, but it will not be too large. Even if the gap is too large, I think it is temporary, because there must be investors arbitrage across regions.

Market value itself is a virtual concept. Multiplying profit by P/E ratio is a multiple of P/E ratio. P/E ratio itself is a concept of return multiple. The corresponding market value of listed companies in two places cannot be accumulated in principle. The market value is higher, which will be more scientific. A higher market value indicates that more people recognize it and it is reasonable to exist.

02 The dual main listing is the initiative defense action of SinoGael, and A+H listing is also possible in the future

Liu Xingliang: Ali was listed on the Stock Exchange for the second time in 19 years. Why did it choose dual listing at this time point?

Sheng Xitai: In the past two years, stock concept has become more and more passive in the United States. The introduction of the foreign company accountability law in the United States in 2020 is actually equivalent to finding a reason to review the audit work papers of stock concept.

What is a working paper? An enterprise moves from auditors to a complete audit report , all original records cannot be changed.

In the past, nearly 300 Chinese companies were listed in the United States. Although many of them were audited by the four largest accounting firms in the United States, the SEC did not require to see the audit papers. However, from 2020, foreign companies will be required to submit relevant papers to confirm that relevant companies will not deceive investors.

With the implementation of the bill, more and more enterprises have entered the pre delisting list. Alibaba entered the pre delisting list in July, which should be within one month. If the enterprise does not submit reasonable reasons to respond to the pre delisting in time, it will enter the delisting list. After the deadline, the delisting process will be officially launched.

If delisted, the company will be delisted (note: if it is a secondary listing, the main body will be delisted, and the secondary listing place will also be delisted), and the company will fall into a passive situation. In this case, many companies will be forced to choose dual main listing. Alibaba's operation can be understood as a defensive action.

So far, several enterprises such as Xiao Peng have completed dual listing , which can be understood as actively promoting defensive actions, and also allowing more Chinese investors to enjoy the growth results of such enterprises in the economic environment of rapid growth.

Liu Xingliang: Then why did Ali not choose the A+H combination for dual listing, but just chose the H-share method?

Sheng Xitai: I think the next step of A+H shares is also possible, but the span is very large. Because Alibaba is such a giant, the current capital market in the mainland may not be able to support it, which may cause great shock. On the other hand, the institutional design of the Hong Kong Stock Exchange is very similar to that of the American Stock Exchange, but A+H is still possible in the future.

03 The large size makes Ali's actions more attractive, and he will not take the initiative to delist from the US stock market subjectively

Liu Xingliang: Alibaba's application for dual major listing in Hong Kong is totally different from the significance of its secondary listing in 2019. What impact do you think Alibaba's dual listing in Hong Kong will have on Hong Kong shares and the entire Hong Kong capital market?

Sheng Xitai: In the Internet era of the past 20 years and the mobile Internet era of the past 10 years, Ali is one of the representatives of the new economy in China and even the world.

With such a large scale, applying for dual major listing on the Stock Exchange will become the nail in the head of the Hong Kong capital market, because in the past 10 years, there have not been many Internet giants in the Hong Kong capital market, or in a sense, many Internet giants have been missed. Now Alibaba and Tencent have gathered on the Stock Exchange, which has greatly helped the overall market value and trading volume of the Hong Kong market.

Ali's current market value is obviously underestimated, but its potential is huge. It can attract many new investors to invest in the Hong Kong capital market.

As for the definition of the capital market, from the perspective of the market, the logic of the market is all about transactions. In the case of large volume, transactions will be easier to match successfully. The more people bid, the more fair the pricing will be.

Liu Xingliang: Ali has let the public know what a dual major listing is. Why hasn't the dual major listing of China Concept stocks triggered more waves?

Sheng Xitai: First of all, several enterprises such as Xiao Peng have completed dual listing However, their influence is not on the same scale as that of Ali, so they did not cause great trouble.

Secondly, Ali is a market vane, which is large enough to attract wide attention. At the same time, the emergence of such landmark events will bring about more far-reaching changes. For example, in 2014, Ali was listed on the New York Stock Exchange, which subsequently promoted the Stock Exchange to change its trading system and equity system.

For example, why Xiaomi and Meituan, which were listed several years ago, could be listed in Hong Kong, is the result of Alibaba's listing in the United States to promote reform.

In 2018, the Stock Exchange introduced two key systems. One is the classified voting system, which was also the core of Ali's failure to list on the Stock Exchange at that time; The second is the launch of the biopharmaceutical sector. A large number of unprofitable biopharmaceutical companies have been listed on the Stock Exchange, making Hong Kong the world's second largest concentration of biopharmaceutical companies. Such companies are no less important than the IT industry.

Ali has indirectly changed the system of the Stock Exchange, and is also enjoying the results of this system, which has a far-reaching impact.

Liu Xingliang: Will Ali's current operation gradually withdraw from the US market and focus on Hong Kong stocks in the future?

Sheng Xitai: It is not our initiative to quit, But there must be another support in strategy. If you are not prepared, you will be very passive.

I believe Ali will not leave the US market on his own initiative, but what if he is forced to leave one day? If people want to read our audit work papers, and to what extent can they get rid of the excuses?

On the other hand, there are some discriminatory provisions in the Accountability Law of Foreign Companies. Even if the competent authorities reach some agreements, we may still be unable to meet some of the provisions, so that one day we will be forced to delist.

04 Delisting consists of three steps: pre delisting list, delisting confirmation and delisting

Liu Xingliang: What are the rules of pre delisting? Can you popularize them? In addition, are there any real delisted companies among these pre delisted companies?

Sheng Xitai:   The first step is to make a pre delisting list. According to the American Foreign Company Accountability Act, foreign listed companies listed in the United States will be included in the pre delisting list if they cannot meet the regulatory requirements of the United States by employing accounting firms outside the jurisdiction of the United States to issue accounting reports.

The second step is to confirm delisting. According to the regulations of the American Stock Exchange or the Securities Regulatory Commission, if an enterprise cannot prove that it does not need to be delisted within the 20 day period of entering the pre delisted list, it will be entered from the pre delisted list into the confirmed list.

The third step is called compulsory delisting. After being included in the list, three years have been reserved, If the inspection requirements of US regulators on auditors cannot be met In theory, they will be delisted.

So far, more than 150 companies in China have been recorded in the pre delisting list , but was not really delisted.

05 Ali's completion of dual listing will drive more enterprises to return to Hong Kong and promote the prosperity of Hong Kong's capital market

Liu Xingliang: What impact will Alibaba's dual listing have on various investors in our country? Will it be more convenient for mainland investors to buy Hong Kong shares in the future?

Sheng Xitai: First of all, the market capacity is large and the trade fair is more active. You can see many new investors. At the same time, it will be more convenient to buy Hong Kong shares. Alibaba's listing in Hong Kong will bring a lot of new capital flows into the Hong Kong market. The great thing about China's economy over the past decade is that there have been Internet enterprises, and most of them have been listed in the United States. If the enterprises represented by Ali come back, there is no doubt that it will be very beneficial to the expansion of Hong Kong's capital market and the overall volume of China's capital market.

Liu Xingliang: Ali, a large company, has started to list in Hong Kong. Does that mean that going ashore in Hong Kong will become the trend of the future?

Sheng Xitai: It should be a trend for China. It must be welcomed from the perspective of the Hong Kong capital market and the national level. However, there are only a few companies that meet the main dual listing conditions, perhaps about 60. They are all representative enterprises of China's new economy in the past decade in terms of size, overall structure and business model, Are likely to be listed in Hong Kong.

Liu Xingliang: Can you predict how long it will take for these 60 companies to return? In addition, some people mentioned that the collective delisting of China Concept shares would have a great impact on the US market and could make the US market lose its hegemony. Do you agree with his statement?

Sheng Xitai: Ali's application for dual listing has caused great shock. This is not only a defensive action, but also represents that Hong Kong Stock Exchange is willing to accommodate and accept companies of this size, so it is an inspiration for other Chinese concept stock companies.

As for the above statement, I don't quite agree with it. First, I think the economic size of the United States is enough to support its position as the global leader. Even if the United States loses all foreign companies in the capital market, its foundation will not be shaken. Second, his main purpose is to target China Concept Shares, and he is not so hostile to enterprises in other countries.

Liu Xingliang: Are many of the funds in Hong Kong now from the mainland going south? Will the mainland investors' participation in the capital market in Hong Kong be seriously involved?

Sheng Xitai: Ali is a high-quality large enterprise. After being listed in Hong Kong, the trade fair will become more active and attract domestic and foreign investors who have not invested in Hong Kong before. It's not a bad thing for investors. It depends on how individuals seize the opportunities of Hong Kong stocks.

Liu Xingliang: In the past, it was not convenient for us to buy the shares of China's Internet giants. If we come back to dual listing in the future, some domestic shareholders complain that they cannot enjoy the development dividend of China Concept Stock. What do you think of the future development?

Sheng Xitai:   I think we should have confidence. There are many opportunities in the Internet era. China is now in a new era of specialization and specialty. At present, 80% of enterprises in the Internet era are in second and third tier cities. Our battlefield has changed. Where to fight should be our choice. Science, technology and industry will have great prospects in the next ten years to solve the problem of choking. Similarly, as long as the Chinese economy maintains this level, the capital market will surely develop more and more healthily.