Behind The IPO Explosion, VC / PE Companies Welcome Exit Feast

Recently, the capital market has been playing well. On July 20, the first Cambrian stock of domestic AI chips officially landed on the science and technology innovation board, with an opening increase of nearly 290%, and the market value exceeded 100 billion yuan. On the same day, ant group announced that it would seek simultaneous listing on the science and technology innovation board and the Hong Kong stock exchange, with a target valuation of US $200 billion. On July 22, Qianxin, a network security enterprise, landed on the science and technology innovation board. On the first day of listing, Qianxin's share price rose 138% and its market value exceeded 90 billion yuan.

Behind the IPO of these enterprises, there are long-term support from VC / PE Institutions. Back to the first half of this year, VC / PE companies are ushering in the exit feast in this IPO explosion.

According to the data of China Investment Research Institute, in the first half of 2020, the global IPO market dropped slightly, and the IPO scale of A-share market reached a new high in the same period of nearly five years. Among the IPO enterprises, 122 Chinese enterprises with VC / PE background have been listed. The IPO penetration rate of VC / PE Institutions is 65%, and the total book exit return of VC / PE Institutions is 228.019 billion yuan.

There are at least 8 investment institutions such as CDH and CDH in the first half of this year. According to the 21st century economic report, with the implementation of the gem registration system, the number of IPO companies in the second half of this year may be more.

The positive impact of the IPO / PE exit on the secondary equity market is beneficial to the industry. At the same time, it is transmitted to the primary market, and the investment valuation of projects in some fields is constantly improving. For VC / PE companies, it is also necessary to pay attention to the upside down risk in the future.

Scientific and technological innovation projects are facing the best opportunity to withdraw, and the organization calls for the overall ecological construction of venture capital

On July 22, Zhenyou technology was listed on the science and technology innovation board with a stock price increase of more than 150% on the first day of listing. For the investor Tongchuang Weiye, it ushered in the company of the longest listed company. At the same time, this is also the fifth listed enterprise of Tongchuang Weiye this year.

Zheng Weihe, the founding partner and chairman of Tongchuang Weiye, told the 21st century economic reporter that so far, Tongchuang Weiye has 5 IPO companies, including Yitian shares, Guizhou Sanli and Zhenyou technology. Two other enterprises have held meetings on the science and technology innovation board and the growth enterprise market, and one enterprise has held meetings at the selected level. It is expected that Tongchuang Weiye will harvest 12 to 15 IPO companies throughout the year, which will exceed the best historical performance of previous years.

"Judging from the current IPO rhythm, there is still pressure on the capital market in the second half of the year. For us, it is not to say that we hope that the faster the IPO pace, the better, but that the healthier the market is. For venture capital ecology, reform policies such as the registration system are very important. At the same time, there are still many areas that can be improved in terms of tax conditions and sources of funds. " Zheng Weihe added.

In fact, it is not only Tongchuang great undertaking, but also many VC / PE companies mentioned above have ushered in great harvest. For the formation of the IPO explosion, Zheng Weihe believes that, first of all, a series of policy dividends, such as the science and technology innovation board, the registration system of the gem, and the selection layer of the new third board, make the IPO road of enterprises more smooth. Second, on the capital side, the opening of China's capital market leads to the inflow of overseas capital. At the same time, domestic institutional investors are also speeding up the pace of investment, and some residents' financial funds are also transferring to the stock market.

In terms of quality, in the third year of reform and opening up, many high-quality enterprises have accumulated. They need a long time of development to achieve profitability, so under the original audit standards, there are more restrictions on listing. Now, with the reduction of the profit threshold requirements, they have the possibility of listing and financing and achieving rapid development.

"In particular, the semiconductor companies in all walks of life have benefited most from the IPO, but the most innovative enterprises in all walks of life will benefit from this IPO." Lin Shiji, vice president of the board of directors of the 21st century capital, said.

According to the company's IPO, there are 1 and 3 enterprises that are preparing for IPO. More than 10 cornerstone of IPO may be harvested this year.

Lin Ling said that science and technology innovation enterprises have been starting and accumulating in the past, but they have a long time of loss or little profit. It is very difficult for them to go public. Even if they are listed overseas, they may not be recognized. Now, after the listing channel is opened, we can get more rapid development of funds.

"The current market environment is the best time for technology entrepreneurs to go public." Another VC partner told the 21st century economic report. Many companies listed at this time can raise more capital and have higher valuation. However, when the market valuation is high, enterprises should not be too excited and rush to go public when they are not ready.

Enterprises' overestimation causes investment enthusiasm in the primary market and vigilance against the risk of upside down valuation

For VC / PE companies, the original investment in science and technology innovation enterprises needs a long time to wait for their development and listing. But now the pace of listing of such enterprises is speeding up, and the valuation situation in the secondary market is also very good, which is expected to bring good exit rate of return to VC / PE Institutions and increase the DPI of funds.

"The positive exit from the secondary market will also feed back to the primary market, making more LP confident and willing to invest their funds in newly raised funds." A VC partner told the 21st century economic report. Now the project valuation in the secondary market has been high, and smart money will be willing to go to the primary market, which also leads to further innovation and entrepreneurship.

However, the improvement of the fund-raising environment in the primary market is still limited. The impact of the new asset management regulations is still continuing, limiting the flow of some funds to the equity investment market. The investment funds of large state-owned enterprises have strict supervision requirements. The government guidance fund also has the requirement of return investment proportion.

From the investment point of view, the upsurge of the listing of science and technology innovation enterprises has also triggered more funds to invest in science and technology innovation enterprises. Lin Ling said that cornerstone capital has been investing in science and technology innovation enterprises for a long time. Now, the overvalued value of listed enterprises is also transmitted to the primary market, and the project valuation is constantly increasing.

"We all look at enterprises with the mentality of high growth and good valuation in the secondary market. However, it is not easy for investment institutions to start with. They think that the project is a little expensive, because there is uncertainty about how to price the secondary market." "But on the whole, the primary market is still relatively cautious now, and it is not to say that it is completely heading in."

Lin Ling believes that at present, the market is still in the process of rapid accumulation and expansion. The market value of many projects after listing is higher than the investment price, which is floating profit for institutions. However, in the holding period of one to three years, whether the enterprise is growing continuously to meet the high expectations of secondary market investors for the project is questionable. If we can, the market will maintain or even strengthen the heat. If the performance of the leading enterprises is far from what we expected, the heat will also be impacted.

Xiao Bing, President of Dachen financial intelligence, also said that in the next year or two, the number of IPO in China will usher in explosive growth. At the same time, IPO market will gradually tend to be rational and mature, such landmark events as IPO breaking and IPO failure may appear. Investors should still think calmly in front of the IPO fever and be alert to the investment risks of pre IPO projects.