Registration System Reform The Eve Of The GEM Board Backdoor Deregulation Restructuring And Listing Into The New Cycle

In 2019, the major reform of the capital market continued to be released. In October 18th, at the regular press conference of the SFC, Cai Jianchun, director of the securities and Futures Commission's listing, announced that the SFC formally issued the decision to amend the management measures for major asset restructuring of listed companies.

As one of the most important reforms in the capital market this year, the change of the merger and reorganization rules focuses on the level of backdoor listing, including simplifying the standard of reorganization and listing, eliminating the "net profit" index, allowing the high-tech industries and strategic emerging industries to meet the national strategy, restructuring and listing the assets on the gem, and restoring the restructuring and listing supporting financing.

Counting the deregulation of the backdoor, the SFC has been reforming the regulatory boundaries of mergers and acquisitions through dozens of policies in the past year. Under the background of the 12 changes, the M & a market has also entered a new regulatory cycle.

It is worth noting that, compared with the lax cycle of the merger and reorganization regulation, the SFC pays more attention to supervision. Cai Jianchun said at the press conference: "after the revision of the reorganization measures, the SFC will continue to improve the" full chain "regulatory mechanism to support high-quality assets in the listed companies. At the same time, it will continue to strictly regulate the listing and listing activities, and continue to strictly regulate the "three high" problems of mergers and acquisitions, and crack down on illegal activities such as malicious shell speculation, insider trading and manipulation of the market.

Gem can not get rid of borrowing constraints

The most important part of the SFC's reform is the deregulation of the gem, which is also considered an outpost for the reform of the gem registration system.

Before that, the gem will not be allowed to be reorganized, but some of the listed companies on GEM have the urgent need to defuse business risks. For example, in the "tight credit" environment in 2018, small and medium-sized private enterprises have a weak ability to resist risks, and some enterprises' capital chain has been exposed to problems. The controlling shareholders' debts are high, and they have basically failed to save themselves and get rid of difficulties through their own efforts of the company and the actual controllers.

On the other hand, policy constraints also restrict capital market's support for entrepreneurship. At present, there are still a large number of high technology and high quality assets that satisfy the conditions of gem.

However, the SFC also made it clear that not all enterprises' backdoor businesses can be backlog. The SFC is strong enough to allow the related assets of high-tech industries and strategic emerging industries to meet the national strategy in the gem, and other assets should not be restructured on the gem.

In this regard, an investment bank in Beijing believes that "the concept of capital market support for science and technology should be reflected in all sectors and levels. Apart from the" Chuang Chuang "board, other sectors, including the gem, should support high-quality innovative enterprises to enter the capital market. The restriction and release of the reorganization and listing of gem will be another important path for the company to enter the capital market.

In addition, looking at the changes in the M & a policy, we should see that the deregulation of the gem is just to restore the market mechanism and function, and the purpose and concept of regulation have not changed. In recent years, regulators have continued to increase support for mergers and acquisitions transactions that conform to industrial logic, return to the source of entities, and conform to national strategies. This new deal also reflects this intention.

The chief beneficiary of Huatai's joint acquisition, Lao Chi Ming, said: "allowing the biggest beneficiaries of the backdoor business of gem should be the integration of industries. The overall size of GEM companies is small, so when the GEM companies expand their external expansion, the rules of the backdoor are somewhat like Damour's sword on the head, which greatly restricts the industry integration of the "swallow swallow elephant" of GEM companies. Loosening the backdoor restrictions of the gem will enable the industry integration of "small fish to eat big fish" no longer be restricted, and further increase the support for strategic emerging industries and industrial upgrading. On the other hand, allowing the backdoor of the gem has increased the feasible path to resolve risks for the troubled GEM companies.

New regulatory cycle of mergers and acquisitions

In June 17, 2016, the SFC amended and promulgated the "new regulations on the most stringent backdoor regulations in history" - "the management measures for major asset reorganization of listed companies" (hereinafter referred to as the "reorganization management measures") and the relevant supporting measures, and issued a formal draft in September 9th.

The revision of the "reorganization management measures" refers to the short-term speculation "speculation shell" and the avoidance of backdoor "backdoor" reorganization, in order to regulate the major asset reorganization of listed companies, and support the upgrading of the quality of listed companies through mergers and acquisitions, which is also considered by the market at that time to be the beginning of the last round of mergers and acquisitions.

And to some extent, the SFC loosened the identification of the backdoor, which is also considered to be a round of adjustment for the start of a round of mergers and acquisitions in October 2018.

Specifically, the revision of the SFC cancelled the "net profit" index of the standard of reorganization and listing, and supported listed companies to achieve resource integration and industrial upgrading based on mergers and acquisitions. In addition, the calculation period of the cumulative first principle will be further shortened to 36 months, and the buyer and its associated parties will be guided to speed up the injection of high-quality assets after controlling the company.

For these changes, a Shenzhen brokerage investment bank explained: "small and medium private enterprises listed companies operating in difficulties, especially GEM companies, are very easy to get involved in restructuring and listing standards because of their relatively small scale, and it is difficult to achieve transformation through mergers and acquisitions. For example, for the net profit index, for profit margins are weak, and even a loss company, injecting profitable assets is a barrier, resulting in an individual company going back to buy smaller assets.

As for the change of regulatory cycle of the entire M & a market, Chen Guo, a strategist at Anxin securities, thinks that the evolution of the policies of M & A has its background.

Chen Guo said: "since 2011, the M & a policy has undergone many rounds of evolution, and its impact on the capital market has become increasingly profound. After 2011-2013 years of initial development and 2014-2015 years of encouragement and consolidation, the merger and acquisition has undergone a sharp contraction in June 2016 under the suppression of the most stringent backdoor standard, and has entered the stage of adjustment and tightening. Since the second half of 2018, direct financing has received more and more attention. Under the support of a series of policies, the M & a market is expected to usher in another development opportunity.