Dec 07, 2018 (China Knowledge) - The new tech board in Shanghai, proposed by President Xi Jinping last month, has drawn much speculation and discussion from bankers and brokers alike; but it seems like we are a step closer towards having a clearer picture on what the listing requirements will be like.
It is currently expected that unprofitable companies will also be allowed to list and raise funds on this new boards. However, only companies with core technologies in fields such as computing, software design and drug development will be allowed to list on the upcoming board.
The Shanghai stock exchange is likely to start reviewing applicants in March next year with the first batch of listings to happen in June. Listing requirements and rules for the new board is set to be published by January next year.
The new board may take a leaf out of Nasdaq’s book to scrap profit requirements and adopt a registration-based IPO mechanism with looser forex controls and more flexible trading system.
Currently, unprofitable companies are barred from listing on the Shanghai and Shenzhen stock exchanges. Domestic companies will be given priority for listing on the new board however companies with unproven technologies such as blockchain and bike sharing are also not eligible for listing.
The new board will also likely incorporate the Chinese depository receipts (CDR) system which seeks to lure overseas-listed mainland tech companies to re-list in China. Under the CDR system, a part of the company’s shares will be entrusted to a custodian bank which will then sell them on the exchange. The implementation of this system was eventually delayed to prevent an equity influx that could worsen the country’s already weak markets.
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