New Changes In IPO Underwriting Under Registration System: Issuers Are Allowed To Enter The Bookkeeping Scene, And Non Strategic Investors Can Also Participate In One-On-One Roadshows

     “ After experiencing some problems in the early stage, the new share issuance, pricing and underwriting rules under the registration system ushered in a round of revision, which is also the process of continuously promoting the registration system reform by checking and filling up the deficiencies in the supervision. "

For the recent regulatory initiatives, some senior investment bankers in Beijing commented to the 21st century economic reporter.

After Shanghai and Shenzhen Stock Exchange optimized and adjusted the pricing mechanism of some stocks issued on the science and technology innovation board and the growth enterprise market last week, recently, the China Securities Association also solicited opinions from various securities companies on the "underwriting standards for initial public offering of stocks on the science and technology innovation board and the growth enterprise market" (hereinafter referred to as the "underwriting standards").

From the revised content, the underwriting specification intends to expand the scope of the one-to-one pre roadshow to "potential investors with certain investment strength" to enhance investors' understanding of issuers. Considering the pricing power of the Issuer on its own stock, the issuer is allowed to enter the bookkeeping site. The Securities Association also stipulates that the lead underwriter shall conduct self-examination and self correction on the issue bookkeeping work and whether there is any violation of the rules every year.

In addition, in the aspect of investment report, the Securities Industry Association will no longer require the price report to give the value range of each share of the issuer in this issue, which can reasonably give the overall forward fair value range of the issuer after listing. The lead underwriter shall formulate a special internal system for investment value research reports, and appoint senior managers of research departments to be responsible for relevant work.

Adjustment and reconstruction of new stock underwriting system

In the process of underwriting registered new shares, the Securities Industry Association has issued the "standards for underwriting initial public offering stocks on the science and Technology Innovation Board" and "underwriting standards for initial public offering securities on the growth enterprise market" in 2019 and 2020 respectively, and the "underwriting standards" for soliciting opinions is to unify the practice requirements and standards of the underwriting link.

According to the previous provisions, after the registration application documents of the proposed listed company are accepted, they can carry out one-to-one pre roadshow promotion with the lead underwriter and strategic investors to introduce the basic information of the company and the industry, but the content of the roadshow promotion shall not exceed the scope of public information disclosure recognized by the CSRC and the exchange.

From the content of the draft, the Securities Association intends to expand the main scope of the one-to-one pre roadshow from "strategic investors" to "potential investors with certain investment strength", so as to enhance investors' understanding of the issuers, and stipulate that the contents of roadshow promotion should comply with the requirements of relevant laws and regulations, regulatory provisions and self-discipline rules.

In this regard, Wang Jiyue, a senior investment banker, believes that this amendment is actually legalization of the pre roadshow. Previously, before the issuer got the approval, the issuer and the lead underwriter could only conduct one-to-one roadshows for strategic investors, but not for general investors who participated in offline inquiry. Now, the rules have been revised to allow one-on-one roadshows to potential investors other than war investment.

"In fact, it is to let more investors know the issuers in advance, and the prices given in the offline inquiry may be more accurate." There are domestic head securities firms investment banking business related responsible person said.

In addition, Wang Jiyue also said that the reason why potential investors with certain investment strength were not included in the scope of one-to-one roadshows may be due to one-to-one roadshows or the existence of private price matching. In this regard, the Securities Industry Association also plans to require the issuer and the lead underwriter to sign a roadshow recommendation confirmation letter with investors after the roadshow is completed to confirm that the roadshow promotion content meets the requirements of relevant laws and regulations, regulatory provisions and self regulatory rules. The confirmation of relevant roadshow promotion shall be filed by all parties for future reference.

In consideration of the pricing power of the Issuer on its own stock, the underwriting standard also intends to allow the issuer to enter the bookkeeping site. The so-called "bookkeeping" means that the lead underwriter shall book and file the quotations of offline investors, record the subscription price and subscription quantity of offline investors, and determine the issue price or range according to the bookkeeping and filing results.

"Issuers can enter the bookkeeping scene, just block the mobile phone signal." Wang Jiyue also expressed his understanding of the revised new regulations. According to the draft, on that day, anyone who knows the quotation and pricing information of investors shall not disclose the quotation and pricing information to the outside world, and shall report all mobile phone communication numbers to the compliance personnel of the lead underwriter. The lead underwriter shall, on a regular basis, carry out self-examination and self correction on the issuance bookkeeping work and whether there is any illegal behavior, etc., and rectify the problems and hidden dangers found in the self inspection in a timely manner.

However, in the interview, there are also securities investment bankers who think that the issuer's entry into the bookkeeping scene will not produce much practical significance. The person in charge of the above-mentioned investment banking business disclosed that the previous regulatory rules did not restrict the entry of issuers into the bookkeeping site, and some issuers successfully entered the bookkeeping site in the actual case operation process“ Even if the issuer enters the scene, the price information of IPO bookkeeping will be blocked by the exchange, and the price can be seen only after the inquiry is completed, which has little actual impact. "

Reform and optimize the issuance pricing mechanism

Whether the issuers are allowed to enter the bookkeeping site or the one-to-one pre roadshow investor type expansion, they are actually promoting the optimization of the IPO pricing mechanism under the registration system from the underwriting link.

"The registration system reform has entered a critical period of promotion, and we should continue to make solid and meticulous preparations. We should focus on the reform and optimization of the pricing mechanism for issuance, improve the quality of the disclosure of prospectuses, further clarify the responsibilities of intermediary agencies, and improve the system and mechanism for preventing the risk of clean government At the 2021 system mid year regulatory work meeting held recently by the CSRC, "laying a solid foundation for the reform of the whole market registration system" was listed as the No.1 Project of the CSRC system in the second half of the year, and the reform and optimization of the issuance pricing mechanism ranked first among them.

In early August, in the face of the new situation that some offline investors under the registration system pay more attention to strategy than research, in order to win the shortlist of "group quotation" and interfere with the issuance order, the CSRC proposed to amend the "special provisions on the issuance and underwriting of initial public offering securities on the growth enterprise market". In the future, the IPO price will exceed the median and weighted average of the offline investors' quotation after excluding the highest quotation, Excluding the highest quotation, the lower of the median and weighted average of the quoted prices of public funds, social security funds, pension funds, enterprise annuity funds and insurance funds, or it is not required to be linked with the purchase schedule and the number of special announcements on investment risks.

Last Friday, the Shanghai and Shenzhen stock exchanges simultaneously revised the relevant supporting business rules for the issuance and underwriting of new shares on the science and technology innovation board and the growth enterprise market, and solicited opinions from the public. The relevant amendments include: adjust the rejection ratio of the highest quotation, that is, 10% of the high price is reduced to no more than 3%; Adjust the "four value" pricing requirements, and cancel the requirement of linking the IPO pricing with the subscription arrangement and the number of special announcements of investors' risks; Strengthen the supervision of quotation behavior.

Senior investment banks close to supervision told reporters of the 21st century economic report that reducing the proportion of high price elimination will ease the psychological concerns of investors about the rejection of their own quotations, encourage the lead underwriters to give full play to their underwriting ability, guide offline investors to conduct independent research and offer, and actively express their real investment wishes. "

In addition, under the previous pricing rules, the time cost of breaking through the "four values" is high. At the same time, the extent of upward breakthrough caused by investors' group quotation is limited. Under the constraints of various factors, the issuer's pricing autonomy is relatively small“ After the adjustment, it will effectively expand the pricing decision space between the issuer and the lead underwriter, especially in the case of relatively scattered quotations, which is conducive to improving the seller's game ability and improving the pricing efficiency. " The senior investment bank said.

In addition, in the "underwriting specification" to be revised, the issue pricing system is also revised. Among them, the Securities Industry Association will no longer require the investment value research report to give the issuer's valuation range per share of this issue, and can reasonably give the overall forward fair value range of the issuer after listing.

"Now the offline inquiry institutional investors habitually quote to the lower limit of the IPO pricing range. In the face of the underpricing in the pricing process of new shares, the new rules still hope to give a more forward valuation prediction, which will affect the investment institutions' perception of the value of new shares." These senior investment banks believe that.