Across The Border | New rule blocking reverse mergers taking effect
More than 40 mainland firms have shelved asset restructuring plans over the past three weeks, as the CSRC moves to clamp down on back-door listings
Scores of A-share firms have suspended their asset restructuring plans after the regulator tightened its review procedures on reverse merger deals.
According to state-owned Securities Daily, 41 mainland-listed companies have shelved plans to revamp their businesses, including share placements, asset purchases and capital injection, over the past three weeks following a tightened rule by the China Securities Regulatory Commission (CSRC) to stem the so-called back-door listings.
And the CSRC is likely to take further steps to expel habitual loss-makers used as “shells” by unlisted firms to engineer the listings, according to sources with knowledge of the regulator’s thinking.
The companies that withdrew the listing plans cited tightened regulations and the weak stock market as the main reasons for the decisions.
At the beginning of July, the CSRC published a new rule that barred companies from raising funds via the domestic stock market via reverse merger deals, showing its tough stance on the attempts by overseas-listed firms to return to the mainland market.
The companies have abandoned the plans since it’s unlikely they could pass the regulator’s review procedure. The regulator doesn’t want to see strong buying of those shell [companies]
Dozens of overseas-listed Chinese companies, following privatisation, started hunting “shell” firms on the A-share market to gain a listing status on the mainland early this year.