The "registration system" is being promoted again. Should IC companies choose the Science and Technology Innovation Board or the Growth Enterprise Market for listing?

The capital market is the "barometer" of my country's economy and the country's core competitiveness. When it comes to the capital market, the core is the stock market. Since the opening of the Shanghai and Shenzhen stock markets in 1990, my country's capital market has formed a variety of equity trading platforms such as the main board, small and medium-sized board, GEM, third board, and science and technology innovation board, and has the embryonic form of developing a multi-level capital market.

Since 2019, the reform of the capital market has accelerated. Whether it is the landing of the Science and Technology Innovation Board, the release of the reform "roadmap", the continuous improvement of the degree of opening up to the outside world, etc., they have all promoted enterprises to increase the proportion of direct financing through the capital market, reduce financing costs, and continue to develop rapidly. Just a few days ago, the "Overall Implementation Plan for the Reform of the Growth Enterprise Market and the Pilot Registration System" was released, marking the coming of the era of the Growth Enterprise Market registration system, which echoes the registration system of the Science and Technology Innovation Board. Some analysts say that the Science and Technology Innovation Board and the Growth Enterprise Market registration system are important reform measures for the country to steadily promote the securities issuance registration system, and are also important arrangements to deepen capital market reform, improve the basic system of the capital market, and enhance the functions of the capital market.

New benefits  

It has been more than 11 years since the launch of the GEM.

The GEM market, which was launched on March 31, 2009, is the result of 10 years of preparation by the Shenzhen Stock Exchange. The purpose of its establishment was to provide financial services for innovative and growing enterprises, to provide a financing platform for independent innovative enterprises, and to establish a new exit mechanism for venture capital (VC) and private equity investors.

According to statistics from Jiwei.com reporter Zhang Hao, there are currently 45 semiconductor companies listed on the ChiNext, covering the equipment, materials, design and other industrial chains as well as IDM, electronic distribution and other models.

Map: Zhang Hao, Jiwei.com

The introduction of the registration system to the GEM is undoubtedly a major positive. Ben Jinfeng, president of Rongtong Capital, said that the reform of the GEM has brought great flexibility to the capital market. As the listing process is more market-oriented and simpler, it will greatly improve the efficiency of IPOs, which is beneficial to investors, conducive to creating asset liquidity, and convenient for companies to exit after listing. Moreover, this process will become smoother, which is also an important step in learning advanced foreign experience and has positive significance.

From the perspective of VC, after experiencing the investment boom in PC Internet and mobile Internet, China's VC investment has turned to return to more "hard technology" fields including intelligent manufacturing, integrated circuits, artificial intelligence, etc. Whether it is the launch of the first and second phases of the National Big Fund, the opening of the Science and Technology Innovation Board, as well as the industrial drive of 5G commercialization, AIoT, etc., coupled with the domestic substitution boom caused by the uncertainty of the international situation, it has brought about a booming scene of semiconductor investment. Chen Datong, chairman of the Investment Committee of Yuanhe Puhua, believes that China's semiconductor industry has entered a period of rapid development jointly promoted by the government and the market since 2014, and the semiconductor industry is ushering in a "golden decade". As countless VCs flock in, the GEM registration system has undoubtedly injected new vitality into the PE/VC exit market.

Therefore, it can be foreseen that the introduction of the registration system in the GEM will promote the survival of the fittest within the board, further improve the capital exit mechanism, and provide more opportunities for companies that serve new business models, have new technologies, and have great market potential.

Different from the registration system of the Science and Technology Innovation Board?

The "innovation" of the ChiNext is meant to be a reference to the Science and Technology Innovation Board.

According to statistics, with the listing of Guangyun Technology on April 29, the number of companies listed on the Science and Technology Innovation Board has reached 100. Only 9 months have passed since the opening of the Science and Technology Innovation Board on July 22, 2019. 14 100-yuan stocks and 2 companies with a market value of 100 billion yuan have been born here, and the total market value accounts for more than 2% of A-shares. The Science and Technology Innovation Board has become an important new force in China's capital market. IC companies occupy 19 seats on the Science and Technology Innovation Board, demonstrating their hard technology strength.

Map: Zhang Hao, Jiwei.com

Although both are registration systems, they are still different from the Science and Technology Innovation Board. According to the Securities Times website, the pilot registration system reform of the Growth Enterprise Market is generally consistent with the Science and Technology Innovation Board. The registration procedure is divided into two parts: exchange review and CSRC registration. Through questions and answers, companies are urged to improve the quality of information disclosure. Compared with the Science and Technology Innovation Board, the registration system of the Growth Enterprise Market is different in three aspects: first, a coordination mechanism for the review work of the Shanghai and Shenzhen Stock Exchanges is established to maintain consistency in the review standards and avoid the situation of scrambling for resources; second, the connection arrangements for companies under review are clarified to ensure the transition to the registration system; third, the registration system is implemented simultaneously for refinancing and mergers and acquisitions involving public offerings.

From Ben Jinfeng's point of view, the two markets have different technical requirements for enterprises, such as continuous profitability requirements and scale, but the differences are not particularly large. The two markets themselves have broad development prospects, and there is no strong competition between them for the time being.

Data source: Investment Bank Soldier

It is worth noting that while the ChiNext is "innovating", the Science and Technology Innovation Board is also strengthening "supply".

In March, the China Securities Regulatory Commission issued the "Guidelines for the Evaluation of Science and Technology Innovation Attributes (Trial)", which further clarified the connotation and extension of science and technology innovation attribute enterprises and proposed a specific evaluation index system for science and technology innovation attributes. It is understood that the science and technology innovation attribute evaluation index system adopts the structure of "conventional indicators + exception clauses", including 3 conventional indicators and 5 exception clauses. If an enterprise meets the 3 conventional indicators at the same time, it can be considered to have science and technology innovation attributes; if it does not meet the 3 conventional indicators at the same time, but meets any one of the 5 "exceptions", it can also be considered to have science and technology innovation attributes.

Some experts pointed out that the three conventional indicators focus on the company's R&D, patents and revenue capabilities, and can more comprehensively measure the company's R&D input-output and technological content. The five "exceptional indicators" further refine and implement the principle of supporting national strategies, key core technologies, and companies with outstanding scientific and technological innovation capabilities. It fully reflects the reform orientation of enhancing the capital market's inclusiveness of science and technology innovation companies, and better supports and encourages "hard technology" companies with key core technologies to be listed on the Science and Technology Innovation Board.

choose?

With the advent of the GEM registration system and the “advanced” of the Science and Technology Innovation Board, questions also arise: what choices should semiconductor companies make if they want to go public?

Cheng Jinlong, general manager of Shanghai Zhiyun Investment Management Co., Ltd., believes that the Science and Technology Innovation Board has no historical baggage and the quality of the accumulated enterprises is also better. There will always be less resistance to new reforms in the future. For example, it will be more open to foreign investment in the future. In addition, location is also an important consideration. For the semiconductor industry, Shanghai is undoubtedly one of the most competitive cities, and the industrial clusters in the Yangtze River Delta have great potential for development. Choosing the Science and Technology Innovation Board is largely due to choosing Shanghai.

"From a trading perspective, the Science and Technology Innovation Board has an 'accumulation' effect, and most of the stocks are pretty good high-tech. But the scope of the ChiNext is very broad, and some of the ChiNext index constituents have little to do with technology." Cheng Jinlong is still optimistic about the Science and Technology Innovation Board.

A CEO of a semiconductor company planning to go public told a reporter from Jiwei.com that the introduction of the "3+5" science and technology innovation attribute system of the Science and Technology Innovation Board will be beneficial to truly innovative technology companies. Specifically, the Science and Technology Innovation Board highlights exclusivity and innovation, which will greatly promote the listing of semiconductor companies. The company currently has nearly 200 patents. From a technical point of view, one technology is the world's leading technology and the other is the national leading technology. Moreover, it has achieved high growth through continuous investment in research and development. If it is listed, it is still more optimistic about the Science and Technology Innovation Board.