(Yicai) Aug. 28 -- Investment bankers have told Yicai that they have not detected any recent change in the stance of China’s stock exchanges toward initial public offerings by unprofitable companies, refuting rumors of a new regulatory crackdown.

“Regulatory policies remain unchanged,” said an investment banker at a brokerage in North China. “Before, there were only a few unprofitable applicants, and they all fit the market position. But now, with a larger pool of applicants, it is inevitable that some fail to meet requirements.”

“I haven’t noticed any new developments in IPO policies recently,” a senior sponsor representative at another securities firm said. “But after seeing the successful listings of other unprofitable companies some prospective issuers may have grown eager to follow suit. As the number of applications increases, the rejection of sub-standard IPOs might create the impression of stricter scrutiny.”

Shanghai’s Star Market, a board for science and technology companies, has a special listing pathway, the so-called fifth standard, that imposes no requirements on an IPO applicant’s profit or revenue. It only requires them to demonstrate significant market potential and milestone progress, and for its core business or product to have been approved by central government authorities.

The fifth standard was updated in June to cover artificial intelligence companies and extended support for "hard-tech" enterprises in fields such as quantum technology, biomanufacturing, and embodied intelligence that seek to go public while still in the red.

Shenzhen’s ChiNext technology board received approval from the China Securities Regulatory Commission this April to accept IPO applications from unprofitable firms that meet certain criteria.

Sixty-four have listed on the Star Market so far, compared with only one on the ChiNext, according to figures from Wind Information. Several others, such as graphics processing unit designer Enflame Technology and chip foundry CanSemi Technology, are in the IPO pipeline.

“The growth tier of the Star Market is tailored for unprofitable hard-tech companies,” the North China investment banker said. “Regulators have always focused on industry leaders during reviews, leaving the evaluation of technological attributes for other companies to advisory committees and industry authorities.”

When assessing an IPO project, there are no strict standards, an investment banker in South China told Yicai. “Simply meeting the basic listing requirements is not enough,” the person said. “In fact, applicants also need to be screened by the department responsible for accepting IPO applications,” they added, noting that applicants should communicate with the bourse in advance if unsure.

Editor: Futura Costaglione