The China Securities Regulatory Commission (CSRC) has released a document with the aim of “rebalancing” coordinated primary and secondary markets, optimizing initial public offering (IPO) conditions, refining refinancing regulatory arrangements, and further standardizing stock reduction rules.
Tightening IPO Conditions and Refinancing Restrictions
The CSRC will periodically adjust IPO conditions in line with the recent market situation. For listed companies with stock prices below their IPO launch price, a price to book ratio of less than 1, sustained operational losses, and a high proportion of financial investments seeking refinancing, appropriate restrictions will be placed on their financing interval and scale. It is strictly required that funds raised by listed companies should be invested in their main business rather than diverted to other areas.
Stock Reduction Rules and Dividend Requirements
If a listed company’s stock sinks below IPO prices or has a price to book ratio of less than 1, or has not received cash dividends in the past three years with cumulative cash dividends less than 30% of the average annual net profit over the same period, controlling shareholders or actual controllers are prohibited from reducing their holdings in the company’s shares through the secondary market.
Implications for the Healthcare Industry
The document raises the IPO and subsequent refinancing threshold for pre-profit biopharmaceutical companies (biotechs), increasing pressure and motivation for their commercialization transformation. This means that biotechs must optimize their investment layout and focus on their main business in biopharma. The actual controllers and core shareholders of biotechs will also be unable to reduce their holdings and cash out before the company completes its commercialization transformation.-Fineline Info & Tech
