US$9bil IPO plans stalled amid Covid outbreak

Pause button: Healthcare workers waiting to be taken from a hospital to support a phased lockdown operation in Shanghai. Fifteen companies seeking IPOs on the tech-focused STAR Market have suspended applications. — Bloomberg

SHANGHAI: More Chinese companies are halting domestic listing plans as the country’s biggest coronavirus outbreak in two years hampers due diligence and information gathering, affecting an estimated US$9bil-plus (RM37.84bil) in fundraising.

Over the past week, 15 companies seeking initial public offerings (IPOs) on Shanghai’s tech-focused STAR Market have suspended applications, almost all citing impacts from the epidemic, exchange filings showed. The city started lockdowns on Monday.

In Shenzhen, which conducted three rounds of mass testing in March, 67 IPO applicants targeting the start-up board ChiNext have suspended the listing process this month, citing the need to update disclosure to regulators, according to filings.

In all, the suspensions potentially delay fundraising worth 60 billion yuan (US$9.4bil or RM39.66bil), official newspaper Securities Times estimated. That’s equivalent to more than one-tenth of China’s roughly US$84bil (RM353.19bil) in domestic IPO fundraising in 2021.

The real impact on IPO fundraising is likely bigger, as listing hopefuls on China’s main equity boards are not required to make timely disclosures on the vetting process.

The share sales disruption piles pressure on an economy already suffering from developers’ debt woes, anaemic consumption, and contagion from the Ukraine crisis.

To minimise the impact, the Shanghai Stock Exchange has vowed to maintain the steady operation of capital markets during the “special” virus control period.

The bourse said on Sunday it would continue to vet share sale plans by STAR Market candidates and strengthen online communications with issuers and underwriters.

Nevertheless, a growing number of IPO applicants are pressing the pause button, at a time when many companies are required to update their financial results.

Nanjing CIGU Technology Corp, which plans to list on STAR, said on Tuesday it is applying to the Shanghai bourse to suspend vetting of its application.

“Due to the epidemic, the company and intermediary agencies cannot complete due diligence, or answer regulators’ queries during the stipulated time period,” the company said.

Other STAR candidates which halted IPO plans over the past week include Guangzhou Xaircraft Technology Co, CICT Mobile Communication Technology Co and Yuanjie Semiconductor Technology Co.

In Shenzhen, companies including Guangdong Lvtong New Energy Electric Vehicle Technology Co, Plotech Technology (Kunshan) Co and Shenzhen Mould-Tip Injection Technology Co have halted IPO plans over the past month, according to exchange filings. — Reuters