Article/Sina Financial Opinion Leader Column (WeChat official account kopleader) 40 person forum
Now, can the Science and Technology Innovation Board break through the Chinese capital market and realize the "NASDAQ" dream of Chinese technology enterprises?
Recently, the news that Shanghai Stock Exchange "will set up a science and technology innovation board and pilot registration system" made the market cheered, but at the same time, there were many disputes.
China is currently in the process of economic transformation and upgrading. It is difficult for traditional industries such as real estate to sustain economic development as economic pillars. Only scientific and technological innovation can bear the heavy responsibility of our national economic development and national rejuvenation. However, over the years, many scientific and technological innovation enterprises, constrained by the requirements of the domestic capital market on profitability and equity structure, lost the support of the domestic capital market in the critical period, and some chose to bypass and rely on the Hong Kong market and the US NASDAQ market for financing. China's capital market regrettably missed the dividend of an entire generation of Internet innovation enterprises. Therefore, the launch of the Science and Technology Innovation Board is expected. However, it is unknown whether the actual implementation effect will be achieved.
At the beginning, the GEM and NEEQ were launched with great hope, but they were in a dilemma in operation, and it was difficult to really play the role of supporting scientific and technological innovation enterprises. In the past, the "strategic emerging board" was planned for a long time but was forced to be interrupted due to the "stock disaster", and the registration system was planned for many years but difficult to implement. In the first half of this year, the Unicorn CDR, which was very popular, has now been in an embarrassing situation with the stagnation of its issuance.
Now, can the Science and Technology Innovation Board break through the Chinese capital market and realize the "NASDAQ" dream of Chinese technology enterprises?
Dispute 1: Since there is a GEM, is it redundant to set up a science and technology innovation board?
The GEM market established in Shenzhen Stock Exchange in 2009 is defined as follows: "GEM market refers to those whose listing standards are lower than the main board market of traditional stock exchanges, which mainly provide financing opportunities and growth space for small and medium-sized enterprises and high-tech enterprises in the start-up stage, but with good growth." How is this different from the upcoming Science and Technology Innovation Board market? Are there any duplicates?
From the perspective of positioning, the Science and Technology Innovation Board can horizontally compare with the GEM, but it emphasizes "innovation". One of the biggest differences between the GEM and the GEM is that the GEM adopts a registration system rather than an audit system.
At the beginning, GEM was also known as the "NASDAQ" in China, but the traditional thinking of profitability could not be seen in terms of IPO condition regulation alone. And how many innovative enterprises can actually be profitable? None of Alibaba, Tencent, Baidu, Jingdong, Xiaomi, Meituan, Weilai, Pinduoduo, or Ant Financial, Lufax, Didi and many other unicorn companies seeking listing in recent years can meet the current GEM listing requirements. Many innovative enterprises with high-tech content have not yet made profits in the early or middle stages of development, and some have made profits, but their models are not clear. Without the support of the capital market, such enterprises are almost difficult to develop.
The Science and Technology Innovation Board is responsible for supporting scientific and technological innovation enterprises. At this stage, if we want to do it, we must have a new system as the basic guarantee, and the trial reform of the registration system is exactly what it should be. In other words, if there is no registration system, the Science and Technology Innovation Board will not have the realistic possibility of smooth launch.
The advantage of this trial registration system on the Science and Technology Innovation Board is that it avoids excessive demands for profits under the audit system in order to avoid liability and give up the all-round and objective evaluation of enterprises. The current registration system is no longer "net profit first", but a comprehensive evaluation of enterprises from the five dimensions of "net profit, liquidity, revenue, market value, and assets". More judgment on enterprises is given to the market, and enterprises are selected and differentiated through market-oriented means, so that these enterprises have more opportunities to enjoy support from the capital market. Of course, the premise is open, fair and equitable, and the information disclosure is complete.
Why is the registration system not implemented in the GEM, but to open up a new battlefield?
Looking back at China's reform in the past 40 years, the most effective and commonly used measure is incremental reform, that is, to open up a new reform battlefield without touching the vested interests, so that the cost of reform is minimal.
To launch the science and technology innovation board and implement the registration system, it must be piloted. As an independent board, it should be isolated from the main board and the GEM, and operated in a "dual track system" way. This can not only carry out vigorous reform experiments in the science and technology innovation board, but also avoid having a big impact on other boards. Moreover, the successful experience obtained can also be gradually promoted in the main board and GEM in the future, which will fundamentally change the disadvantages of China's stock market.
In addition, it is inferred that the Science and Technology Innovation Board will also allow VIE companies and other special equity structure companies to be listed, as well as the equity structure of "same share but different rights". This will give a green light to the listing of many science and technology innovation companies, and also establish a channel for overseas listed Chinese stocks to return to China for listing.
Dispute 2: Will the Science and Technology Innovation Board be a registration system with waistcoat?
"Can't IPO go without review?" In 2012, shortly after taking office as the chairman of the CSRC, Guo Shuqing asked a surprising question. Since then, the registration system has entered the vortex of controversy.
In 2015-2016, the registration system was also expected to be launched together with the strategic emerging board. However, a "stock market crash" brought the registration system plan to the shelf. After the "strategic emerging board" was deleted from the 13th Five Year Plan, the registration system was forgotten and rarely mentioned again.
Now, the registration system has been put in front of investors again, and the market is again worried about whether the pilot registration system means lowering the threshold and mass listing of enterprises? Even many enterprises with poor qualifications have flocked to the market? Moreover, will the pilot registration system launched in the face of many difficulties be just a "vest" registration system?
On November 5, when answering questions from reporters, the head of the CSRC gave the answer that the pilot registration system has strict standards and procedures, and will pay more attention to the truthfulness and comprehensiveness of information disclosure, the quality of listed companies, the stimulation of market vitality, and the protection of investors' rights and interests in all aspects of acceptance, review, registration, issuance, and trading.
This means that the most difficult first step in the general direction of the registration system has been taken. In fact, China has done a lot in preparing for the registration system. As early as December 2015, the Standing Committee of the National People's Congress had authorized the implementation of the stock issuance registration system. At the beginning of the year, a corresponding system was prepared for innovative enterprises, including CDR. Three years ago, the Shanghai Stock Exchange also studied the registration system and strategic emerging industry board. The Shanghai Stock Exchange has even developed an issuance review system. The market expects that the CSRC and Shanghai Stock Exchange will soon be able to launch the draft for comments on the supporting system.
It is reported that the regulatory authorities are currently working out a pilot scheme for the Science and Technology Innovation Board and the registration system, which needs to balance various relationships. For example, the new funds should be matched with the progress of the pilot, the investment and financing needs to adapt to each other, the primary and secondary markets need to echo each other, and the company's new and old shareholders need to balance their interests, which should be considered in the system design. In addition, scientific and technological innovation enterprises have obvious characteristics of new economy and new model, prominent performance differentiation, and high risk of ordinary investors' participation. It is necessary to set thresholds in terms of assets, investment experience, risk tolerance and other aspects from the institutional level, and strengthen the appropriateness management of investors in the science and technology innovation board.
In particular, the registration system should be able to form a closed loop with the delisting mechanism, so as to solve the current situation of "only advance but not retreat" of A-shares and create a virtuous circle for the secondary market. On November 6, the CSRC issued the Guiding Opinions on Improving the Suspension and Resumption System of Stocks of Listed Companies. It can be seen that various supporting policies are on the way.
For the A-share market, the pilot registration system of the Science and Technology Innovation Board does not mean that the conditions for the A-share market to fully implement the registration system have been fully mature. The realization of the registration system needs to be improved in the legal system, delisting system, investor protection, punishment of illegal acts, supervision and other aspects. If the registration system is launched in a hurry, it will not be achieved as soon as possible. The introduction of the pilot registration system may be a step in exploring the way to move the whole chess game forward.
Dispute 3: Will the Science and Technology Innovation Board follow the same path of low liquidity as the New Third Board?
As a pilot field of the registration system, the NEEQ was also expected at the beginning of its launch. However, although the NEEQ implemented the mode of quasi registration system, the implementation effect was not ideal due to the lack of supporting conditions. The quality of the listed company was almost out of control when it was on its way to success, leading to a mixture of good and bad. Moreover, the continuous bidding mechanism was delayed, leading to high-quality companies turning to Shanghai and Shenzhen Stock Exchanges for IPO.
Although the total number of companies listed on the NEEQ has exceeded 10000, making it the largest basic capital market in the world, in recent years, the NEEQ has a feeling of being "cold". The current NEEQ has almost no financing function and no transaction pricing function. A large number of companies want to withdraw, and the transaction activity and market liquidity are insufficient. It has become an unhealthy market.
As far as the capital market is concerned, only with liquidity and transactions can the market be formed. The market was born from the basic starting point of transactions.
In addition to the supporting construction of the market system, a reasonable threshold for investors is an important condition to ensure market activity and liquidity. According to the news, in the current plan, the investment threshold of the Science and Technology Innovation Board is expected to be set at 500000 yuan, which can not only meet the original regulatory purpose of avoiding retail investors, but also release and expand liquidity.
The importance of liquidity for the Science and Technology Innovation Board is self-evident, and it is also a key indicator to determine whether the Science and Technology Innovation Board will become the Chinese version of the "NASDAQ" or the "New Third Board".
Different from the past, the Science and Technology Innovation Board was proposed by the highest level of the central government and obviously enjoys the highest level of capital market treatment. At present, the Science and Technology Innovation Board is set up inside the Shanghai Stock Exchange. It is an independent level, over-the-counter market, that is, the exchange market. The NEEQ is still a "trading place" from beginning to end.
The introduction of the Science and Technology Innovation Board is an important step in the reform, and it is more important to do it as fast as possible. With the unsuccessful precedent of the New Third Board, the Science and Technology Innovation Board is unlikely to repeat its mistakes. In addition, Shanghai has tried to build itself into an international financial center and a scientific and technological innovation center. In terms of supporting the listing of scientific and technological innovation oriented enterprises, the Shanghai Stock Exchange has explored for many years from trying Unicorn CDR, strategic emerging industry board, international board to today's science and technology innovation board. Therefore, it has long been prepared for the science and technology innovation board.
Dispute 4: Will the Science and Technology Innovation Board impact the Main Board, the Small and Medium Board, the Growth Enterprise Board and the New Third Board?
Once the Science and Technology Innovation Board was put forward, the suspension of IPO for a week did not bring about the rise of the stock market, but fell for a week under the influence of worries about expansion of the Science and Technology Innovation Board.
In fact, the GEM has only been launched for more than 700 years, and the SME board has been launched for less than 1000 years. Even among the listed companies, many are considered to be unqualified and should not be listed. Therefore, the Science and Technology Innovation Board may not bring about major expansion. The first batch of science and technology innovation board companies should mainly be the mature innovative enterprise pilots that originally planned to be listed, and the number will not be too large. After the launch of the Science and Technology Innovation Board, it may be that companies that originally planned to issue CDRs will be directly transferred to the Science and Technology Innovation Board, and some companies that originally planned to IPO on the GEM, SME Board, and the main board will also go to the Science and Technology Innovation Board, and there may be few new companies.
According to market analysis, the Science and Technology Innovation Board is equivalent to adding a new trading plate to the Shanghai Stock Exchange, which is similar to the Shenzhen Stock Exchange in nature and has a much greater impact on capital diversion than IPO. As the Science and Technology Innovation Board is a registered system, together with high-level support, it will certainly attract high-quality scientific and technological innovation enterprises. In the short term, it will have a "bleeding effect" on the stock funds of other sectors of the market, and divert the resources of listed companies in each sector. While market funds flow between Shenzhen Stock Exchange, Shanghai Stock Exchange, Shanghai Hong Kong Stock Connect, Shenzhen Hong Kong Stock Connect and other markets, the introduction of the Science and Technology Innovation Board may lead to changes in the capital distribution structure, which may also have a greater impact on the Hong Kong stock market.
In the A-share market, shell speculation and restructuring have always been a reality. However, with the introduction of the registration system, shell resources are no longer precious among the listed enterprises. Scientific and technological innovation enterprises can go to the Science and Technology Innovation Board if they want to go public, and do not need to go to other sectors to backdoor. The shell resources of the main board and the GEM may become worthless, which may also lead to some delisting problems.
(The author of this article introduces that the China Finance 40 Forum (CF40) is an unofficial and non-profit professional think tank, which is positioned as a new type of "platform+entity" think tank and focuses on policy research in the economic and financial fields.)
