Beijing just made it easier for listed companies to IPO spun off units on domestic exchanges
- Listed companies seeking to spin off units through domestic IPOs need to be profitable for the recent three-year period
- Beijing has stepped up efforts to encourage more domestic stock offerings by fast-growing technology companies
Beijing has made it easier for publicly traded companies to list subsidiaries on mainland Chinese exchanges, with the introduction of new rules for such initial public offerings.
Listed companies seeking to spin off units through domestic IPOs need to be profitable for the recent three-year period, with aggregate profits reaching a minimum 600 million yuan (US$85.8 million), according to the China Securities Regulatory Commission, the country’s top securities watchdog. Previously, it required aggregate profits equalling 1 billion yuan.
Beijing has stepped up efforts to encourage more domestic stock offerings by fast-growing technology companies. It also wants to fend off competition from overseas exchanges that have already attracted the likes of South China Morning Post parent Alibaba Group Holding, as well as social-media giant Tencent Holdings.
The exchanges in Shanghai and Shenzhen also lag behind the Hong Kong stock exchange, when it comes to attracting listings by spin-off units. This year, out of the 11 companies that have listed their subsidiaries, four chose the mainland’s bourses and the remaining opted for Hong Kong.
Beijing Kingsoft Office Software, a unit that is 53 per cent owned by Hong Kong-listed Kingsoft, began trading on Shanghai’s Science and Technology Innovation Board, or Star Market, last month, while CSPC Innovation Pharmaceutical debuted on Shenzhen’s ChiNext board in March after CSPC Pharmaceutical Group, its Hong Kong-traded parent with a 74 per cent stake in the company, completed the spin-off.
