That curious Chinese regulation about IPO sponsors also owning stakes? It’s ‘temporary,’ says nation’s biggest investment bank
- A rule that requires sponsors of initial public offerings (IPOs) on China’s new technology board to also own stakes is “temporary,” said the chief executive of the country’s largest investment bank
- The bank, which counts two of China’s largest tech companies Tencent and Alibaba as among its major shareholders, said it can strike a balance between their interests
A new regulation that compels initial public offering (IPO) sponsors on China’s technology board to also take up stakes is merely a temporary requirement that is subject to amendment, said the country’s largest investment bank.
“We understand that this arrangement is temporary,” said Bi Mingjian, chief executive officer of China International Capital Corporation (CICC), during a press conference in Hong Kong. “It should be handled in the proper manner” by the regulator, he said.
The new rule, rolled out along with the technology board ordered up by Chinese President Xi Jinping in Shanghai, was aimed at ensuring that start-ups involved in technology and innovation can successfully raise capital at home, instead of having to sell their stock offshore in New York, Hong Kong or Singapore. The rule – which is still under government review for how it would be implemented – runs against the standard practice in international banking, which erects a wall between underwriting an IPO and taking a stake.
The new rule underscores the lengths that China’s regulator would go to ensure Xi’s technology board gets off to a successful start. Last month, nine companies submitted their applications to become the first companies to raise funds on the board. Missing from the list were China’s largest unicorns, or companies that surpass US$1 billion in valuations.
CICC, established in 1995 with investment and help from Morgan Stanley and China Construction Bank, has grown over the years to become the largest underwriters and arrangers of Chinese IPOs, helping some of the country’s biggest state firms including PetroChina go to market.
The bank’s top management included a Who’s Who of Chinese politics and high finance. Chinese vice-president Wang Qishan was the bank’s first executive chairman when it was first established, in his capacity as governor of China Construction Bank. Levin Zhu, the son of former Chinese premier Zhu Rongji, was a general manager of CICC, and was on its board from 2004 to 2014.