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Several months after the implementation of the new "Nine National Regulations" and the new IPO rules, the withdrawal of IPO materials has seen new changes - some IPO "nail households" who previously insisted on not withdrawing their materials in the hope of making another attempt have voluntarily terminated the IPO process.

A reporter from 21st Century Business Herald learned from the investment bank's underwriter that these "nail households" can be divided into two main categories: one is those with relatively good performance, with net profits far exceeding the listing benchmark in recent years; taking the main board as an example, Wind data showed that as of August 5 (the same below), among the 60 main board companies that withdrew their materials since June, 12 had a net profit of more than 200 million yuan in the latest reporting period, and 7 had a net profit of more than 600 million yuan, far exceeding the latest main board IPO net profit requirement of 100 million yuan.

The other category is companies that think they have good technology or innovation attributes, but in fact they are not up to the IPO new rules. Such companies are mainly in the Science and Technology Innovation Board and the Innovation Board; some companies in other sectors failed in IPOs because they belong to industries that are not encouraged by policies. In June alone, 22 companies on the Science and Technology Innovation Board withdrew their materials. Previously, the number of withdrawals from the Science and Technology Innovation Board in a single month was basically within 10; the number of withdrawals from the Growth Enterprise Market in June was 36, and the highest number in a single month in May and before was 19, and in most months it was within 12.

At the same time, among the 165 companies that have passed the review for IPO since June, 26 have passed the review and their approval documents have expired, most of which were approved after 2023.

According to the interviewed insurance agents, passing the review is not a safe bet. On the one hand, the CSRC can still inquire about the company through the exchange during the registration stage; on the other hand, after successful registration, the company still needs to wait for the issuance opportunity. At a time when the IPO pace is tightening, non-hard technology companies still face considerable pressure to wait for the issuance opportunity.

IPO "nail households" withdraw materials

Since the "827 New Policy" last year, the number of companies withdrawing IPO materials has increased. The speed has further increased after the release of the new "Nine National Regulations" and the new IPO regulations. The speed increased significantly in June, with 119 companies withdrawing in a single month, more than twice the number of companies withdrawing in other months in the past year. The number of companies withdrawing has decreased since July, but it still remains at a relatively high level.

In the view of the insurance agents interviewed, unlike the companies that withdrew their IPO materials in the past, some IPO "holdouts" have recently chosen to withdraw.

There are many such companies with better performance. Taking the main board companies as an example, among the 60 main board companies that have withdrawn their materials since June, 38 have a net profit of more than 100 million yuan in the latest reporting period, reaching the profit standard of 100 million yuan for main board companies under the new IPO regulations. Among them, 12 have a net profit of more than 200 million yuan; 7 have a net profit of more than 600 million yuan; Changli New Materials, which has the highest net profit, has a net profit of 1.062 billion yuan in 2021; Urban Construction Design, Hai'an Bank, and China Intelligence Holdings also have net profits of more than 800 million yuan in the latest reporting period, which are 873 million yuan, 861 million yuan, and 840 million yuan, respectively.

Why did a company with seemingly excellent performance not want to withdraw before but now actively terminate the IPO process?

According to the analysis of the insurance agent, there are often two types of reasons behind this: on the one hand, the overall performance of the company in recent years has far exceeded the listing baseline, but during the preparation for the IPO, one of the company's major financial data declined. The company hopes to save the IPO by improving its performance next year, but the performance improvement next year is not obvious; on the other hand, the company's performance has increased rapidly in recent years. Although the net profit and operating income have exceeded the minimum listing line, the increase is not large. The company expects the performance to further improve in the next fiscal year to meet the listing requirements; but the performance growth next year may be limited, or it may be difficult to meet the listing requirements in the short term due to the improvement of IPO standards.

Companies with slightly inferior sector fit choose to withdraw

It is worth noting that some companies with a large performance base and steady performance growth in recent years have recently voluntarily withdrawn their materials. The key obstacle to the listing of such companies is that they are not in the policy-encouraged industry or the sector attributes are insufficient.

In terms of non-policy-encouraged industries, the main board and the ChiNext are relatively obvious. A typical example is Hai'an Bank, which has the third highest net profit among companies that have withdrawn their applications since June. Its net profit has steadily increased since 2018, with a double-digit year-on-year increase in four of the six years, and a net profit of 861 million yuan in 2023. However, Hai'an Bank's full name is Jiangsu Hai'an Rural Commercial Bank Co., Ltd. At a time when listing resources are relatively limited, equity financing of financial institutions, especially local banks, is not encouraged, and the IPO path is relatively limited.

The "nail households" who chose to withdraw due to insufficient sector attributes were concentrated in the Science and Technology Innovation Board and the ChiNext.

"Unlike companies that choose to withdraw their materials after being reminded that their sector attributes are insufficient and advised to withdraw their materials, these 'nail households' often have a certain degree of fit with the sector they are in. Companies believe that the fit is fine, but the sector fit of companies queuing for IPO is comparable. In comparison, companies with slightly lower fit still have slim chances of listing, and companies have no choice but to withdraw after recognizing the reality," said the interviewed insurance agent.

Wind data shows that since June, 29 companies have withdrawn their applications from the Science and Technology Innovation Board, the same number as in January-May this year; 62 companies have withdrawn their applications from the ChiNext since June, 13 more than the total number of companies withdrawn from the ChiNext in the first five months of this year.

It will not be a "safe"

Another phenomenon worthy of attention is that the number of companies that have passed the review but withdrew their materials has increased. It has been more than half a year since these companies passed the review and their approval documents have expired.

According to Wind, of the 165 IPO companies that have withdrawn their materials since June, 26 have passed the review, and the approval documents have expired for half a year. Most of them will pass the review after 2023, with 3 and 4 companies passing the review in 2021 and 2022 respectively. The most recent one, Jingyi Jingwei, passed the review on the Science and Technology Innovation Board on February 5 this year.

Jingyi Jingwei's performance in recent years has been relatively good. Its 2023 annual report performance has not been disclosed. In 2023, its net profit reached 128 million yuan and its operating income reached 558 million yuan.

An investment bank agent told reporters that for companies planning to IPO, passing the review or even successfully registering does not mean entering the safe zone, and they may still be forced to terminate the IPO process. For companies that have passed the review, the CSRC can still make further inquiries through the exchange; after the company successfully registers, it still needs to wait for the IPO issuance schedule.

As the pace of IPOs tightens, the number of newly listed companies decreases, and the probability of companies queuing successfully also decreases. However, companies do not queue up completely according to the registration time. "Hard technology" companies encouraged by policies and companies with particularly outstanding performance often enjoy more convenience.

On the contrary, if the company belongs to an industry with restricted equity, or has special phenomena such as declining performance, receiving fines, or falling into negative public opinion, its issuance will most likely need to "take a back seat" and wait. In the case of a small number of new IPOs each month, waiting sometimes means that the approval document expires and the IPO fails.

Wind data shows that as of August 5, there were 51 newly listed companies this year, with 215 and 214 companies listed in the same period of 2023 and 2022 respectively. The number of new IPOs in the same period of 2021 was as high as 320. The number of companies listed in 2024 is only 15.94% of the peak period in 2021.