China to curb ‘excessive’ fundraising by listed companies
China’s securities regulator unveiled new rules on Friday to restrict “excessive” and “frequent” fundraising by some listed companies, with a focus to put the clamps on private share placements.
A listed company’s private share placement plan must not exceed 20 per cent of its share base, and should not be made within 18 months of a previous fundraising by the firm, the China Securities Regulatory Commission (CSRC) said in a statement on its official microblog.
In addition, non-financial companies with “relatively big” holdings in financial assets or wealth management products were barred from applying for additional fundraising.
The new rules were effective immediately.
A source close to the CSRC told the Post the regulator is collecting opinions on a draft about restricting big shareholders from dumping their holdings on the secondary market. Investors attending the private placement of shares may face longer lock-up period in future that hold them from selling their holdings.
The CSRC said that some listed companies had raised capital that far exceeded their actual needs, and had kept the money idle or invested it in wealth management products.
China’s private placement market jumped five-fold from 2013 to 1.18 trillion yuan (US$172 billion) in 2016, dwarfing the market for initial public offerings (IPO), which raised just 147.6 billion yuan last year.