China Eases IPO, CDR Rules to Repatriate Tech Unicorns' Shares
Du Qingqing|Yuan Ziyi
/SOURCE : Yicai
China Eases IPO, CDR Rules to Repatriate Tech Unicorns' Shares

(Yicai Global) June 7 -- China's securities regulator has eased its rules regarding the minimum market value of emerging economy firms which want to repatriate their shares to China's mainland, in the country's effort to compete for technology and biotech companies' listings with the US.

China Securities Regulatory Commission announced an overhaul of rules regarding initial public offerings and issuances of China depositary receipts yesterday, after running a pilot and a one-month public comment period which ended on June 3. The CSRC also approved the first batch of six 'Unicorn Funds,' with a total value of CNY300 billion (USD46.9 billion).

For firms wishing to pursue an initial public offering in China, the CSRC has lowered the requirements for net profit, operating income, and net assets. In order to list on the main board, a firm must have accumulated earnings of more than CNY30 million during continuously profitable operations in the past three years, which is a fraction of the earlier requirement of CNY3 billion during one year.

The former rules also stipulated that these firms' market value cannot be less than 20 billion yuan, which limited many IPO aspirations. For example, China's largest retailer Alibaba, with a market cap of USD535.4 billion, could not list in Hong Kong due to its voting rights structure, and went public in New York instead with a record USD25 billion IPO, after issuing additional shares.

With the new rules, the market value of a CDR issuer has no restrictions. Companies that issue these types of depositary receipts should, however, be legally established in their respective countries, report stable financial records for the past three years, and have kept the same controlling shareholder for more than three years, without ownership disputes.

The CSRC pledged IPO sponsors to improve their quality of work and stressed that the regulator will strictly control the number of pilot companies and the amount of fundraising, and rationally arrange the timing and pace of stock issuance.

Editor: Emmi Laine

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Keywords: Finance , A-Shares Market , CDRs , CRSC , IPO , China Securities Regulatory Commission , Securities Policy