GDRIt is becoming a new driving force for overseas financing. Since the beginning of this year, there have been more than twentyAA listed company on the stock market announced an issuance in EuropeGDR, wherein8Home Fortune successfully listed on the Hong Kong Stock Exchange.1The company is listed on the London Stock Exchange. So, why are Chinese companies flocking to issue overseas?GDRand for those intending to issueGDRFor companies, what exactly needs to be done?
As a globally renowned growth consulting firm, Frost & SullivanFrost & SullivanFrost & Sullivan (hereinafter referred to as 'Frost & Sullivan') has successfully assisted many Chinese companies such as Guoxuan High-Tech, Greenme, LeapMed and Healthyuan in listing on the Hong Kong Stock Exchange and the London Stock Exchange this year, occupying a large share of market in terms of successful listings and ongoing projects. Jia Pang, Partner and Managing Director of Frost & Sullivan Greater China, was interviewed. "Live Report" Interview, overseas distributionGDRIn this case, we conduct an in-depth analysis of the overseas financing routes of Chinese enterprises.
Live report
Q
Live Report: Why are more and more Chinese companies going public in Europe this year? What are the advantages for Chinese companies choosing to list on the Hong Kong Stock Exchange?
The global operation of Chinese corporate capital is conducive to enhancing the international competitiveness of local enterprises and promoting the healthy development of the capital market. Overall, more and more enterprises are choosing to issueGDRThere are mainly the following two reasons:
First, for the enterprise itself, through issuanceGDRSecond, for the capital market, encourage enterprises to issueGDRIt has advantages such as facilitating cross-border investment and financing, promoting the globalization of capital elements and resources, optimizing the global allocation of resources, and driving the opening up of capital market systems.
In comparison, GDRCompared with other financing channels such as domestic private placements and overseas dual listings, it has unique advantages. For example, if the project cycle is short, the average project cycle is4 - 5The average review cycle is short, relatively lenient, and can significantly reduce the overall cost of issuance;GDRThe issue price shall not be lower than the pricing benchmark date in principle.20Trading dayAaverage share price90%The issue price is relatively high, and the financing efficiency is high; currentlyGDRThere are no rigid restrictions on the use of raised funds, which is relatively flexible and can be flexibly allocated according to the needs of the enterprise;GDRThe audit report for the issuance declaration can generally use Chinese accounting standards, which reduces regulatory costs and avoids the risk faced by US-listed companies that cannot disclose their accounting records to the US Public Company Accounting Oversight Board due to compliance with Chinese regulations, leading to delisting.
Meanwhile, the SEHK was established1993The year has a long history and a large market value.2021Approaching the end of the year2.5Trillion dollars. Moreover, it has advantages such as a stable macro environment, strong liquidity, high valuation, and mature supervision. It is currently the preferred issuance method for Chinese enterprisesGDRThe first option.
Q
Live Report: What is the main process for listing on the Hong Kong Stock Exchange? At what stages does Frost & Sullivan typically provide industry advisory services to companies, and what roles does Frost & Sullivan undertake?
SEHKGDRThe issuance process can be basically summarized into five steps.
First, carry out the issuer's internal processes. The main tasks in this stage include the preparation of prospectuses, English audit reports, domestic legal opinions, industry reports, and the board of directors/Shareholders' meeting review, etc. If applicable, pre-approval procedures will follow. For example, state-owned enterprises may involve approval from the state-owned assets supervision agency, banks and insurance companies may involve approval from the banking and insurance regulatory agency; enterprises with a large amount of user information may also involve network security reviews. After completion, it is submitted to the China Securities Regulatory Commission (CSRC) for review. Once the CSRC officially accepts it, it will issue a 'CSRC Administrative Approval Letter' to the issuer. Administrative Permission Application Acceptance Form("Little path"), and review the application materials. If approved, the China Securities Regulatory Commission will issue the 'ApprovalXXApproval for the Company's Initial Public Offering of Global Depository Receipts and Listing on the Swiss Stock Exchange("Big roadblocks")After obtaining the 'Small Route' permit, you can apply to the Prospectus Office of the SFC (Prospectus OfficeSubmit the prospectus and submit a listing application to the Hong Kong Stock Exchange's Regulatory Authority. Finally, complete other procedures both domestically and internationally, and successfully issue the shares.GDR.
Frost & Sullivan provides services to the company throughout the entire lifecycle of the project. In the early stages of a project, to ensure that the industry section of the prospectus complies with issuance requirements, fully explores industry and company highlights, and addresses any potential questions from exchanges and investors, Frost & Sullivan will issue a detailed industry research framework, which will be discussed and revised repeatedly with the company and various intermediaries.
During the preparation of the prospectus, Frost & Sullivan was mainly responsible for two tasks. One was to write industry reports and the sectoral chapters of the prospectus, and the other was to provide all supporting content related to industry comparisons, competitive advantages and strategies, business segments, etc., which are essential for understanding the industry and the company's comparative strengths and leading positions within it. In the process of writing industry reports, Frost & Sullivan would conduct in-depth research on the industries where their client companies operate, as well as analyze using their more than sixty years of industry database, to write in-depth sectoral research reports. They would also quote core content from these reports to compile the sectoral chapters of the prospectus. Additionally, throughout the entire prospectus, there are many references to industry content other than the sectoral chapters, including but not limited to the overview, competitive advantages and strategies chapters, business segments, risk factors chapters, etc. Frost & Sullivan would continue to provide support to their client companies throughout the entire process of writing the prospectus.
In addition, Frost & Sullivan will continue to participate in the project's regulatory approval and investor roadshow promotion processes, providing multi-dimensional support. In the regulatory approval process, Frost & Sullivan assists issuers in answering questions from domestic and international regulatory authorities regarding the industry, helping issuers efficiently respond to regulatory inquiries and accelerate the approval process. In roadshow materials, Frost & Sullivan provides support related to all industry sectors, company positioning, and competitive advantages, helping companies clarify their investment stories and enhance value and market recognition.
Q
Live Report: Which industries are more suitable for companies listed on the Hong Kong Stock Exchange?
Overall, there are no clear restrictions on the industries that can list on the Ruixin Stock Exchange, making it very diversified. Many of the enterprises that have been successfully issued to date are in new energy, high-end manufacturing, and technology-related fields.
Q
Live Report: Frost & Sullivan has successfully facilitated the overseas issuance of several companies this yearGDRCan you introduce these projects?
Frost & Sullivan has recently assisted multiple companies in successfully launching their products.GDRFrost & Sullivan occupies a significant share of the market in successful projects, as well as many newly launched and pre-sale projects. It also holds a large portion of the overall market, including globally advantageous enterprises from various industries such as MingYang Intelligence, Guoxuan High-Tech, Green Motion, Lepu Medical, Health Yuan, and Giant Technology.
To be issued this yearGDRMost of the enterprises are private enterprises with global advantages, showing a positive signal for Chinese private enterprises to 'go global'. More outstanding private enterprises have issuedGDRIt is not only conducive to private enterprises further exploring international markets and continuously developing and growing, but also helps to accelerate the formation of a higher level of opening up.
Q
Live Report: Your intention to issueGDRWhat suggestions do companies have?
Overseas IssuanceGDRThere are two main considerations: one is why, and the other is how.
From the perspective of why it was done,GDRWhile convenience is one of the reasons for issuing a private placement compared to dual listing overseas, there are two other points that need to be clarified. One is issuanceGDRWhether it meets the company's business development needs, and whether it can further enhance the company's governance level and core competitiveness? Another question is whether the company will be recognized by the international capital market? Generally speaking,GDRCompanies that are successful in issuing shares possess one or more characteristics, including superior technical capabilities, broad development prospects for the industry they belong to, state-owned capital participation or control, and stable profitability over the three years prior to the issuance date. It is necessary to clarify these aspects in advance before the issuance.
From the perspective of how it's done, althoughGDRA short project cycle is a major advantage, but it can also be a significant challenge. In just a few months, completing the drafting of the entire prospectus and obtaining approval from domestic and international regulatory authorities requires the collaborative and efficient work of the company and various intermediary institutions. In addition, the cross-border business capabilities of all intermediary parties will also be greatly tested. For example, due toAThe stock market price has already fulfilled the function of price discovery for the company. How can we convince international investors to buy?GDRIt will be a challenge. For industry consultants, helping companies issue shares at a higher valuation and at a faster paceGDRIt is particularly important for information reserves in the Chinese and global markets.
Q
Live report: ObviouslyGDRIt has become a new path for Chinese enterprises to raise funds overseas. So, do you think this upsurge will continue in the future? Which industries are expected to be affected in the future?GDRAre there going to be more projects?
From three aspects, I thinkGDRThe craze will continue in the future.
One is at the regulatory level, from2018After the Shanghai Stock Exchange launched the "Shanghai-London Stock Connect" in [year], the China Securities Regulatory Commission has improved the regulation onGDRThe regulatory and supportive policies for issuance indicate that in order to maintain smooth overseas listing channels, the policy side is continuously supporting various enterprises' overseas issuance.GDR.
The second is at the enterprise level, Dozens of enterprises actively participated in the issuanceGDRThe grand occasion is the best proof; enterprises highly recognize this financing channel. In the future, it is expected that more enterprises will joinGDRIssued.
The third point is from the perspective of the development of China's capital market, With the enhancement of the value of Chinese enterprises and the implementation of global layouts, it is an inevitable trend for companies to take over from the capital market and march overseas. This can optimize the global allocation of resources and promote the opening up of China's capital market.
GDRThe project industry coverage is as of the current issuanceGDRIt is not difficult to see from the enterprise directory that the first few batchesGDRThe issuance covers a considerable number of industries related to the lithium battery industry chain, new energy industries such as wind power, semiconductor industry chain-related sectors, high-end and intelligent manufacturing industries, and rapidly developing technology-related sectors like medical equipment. However, this does not meanGDRThe project will be limited by the industry, as companies from various sectors such as food and beverages, traditional energy and power industries, services, agriculture, and manufacturing are involved. In the future, withGDRWith further expansion of projects, the industry coverage will continue to widen.
And this trend also meansGDRThe project has met the industry consultant's increased requirements. On the one hand, there are extremely high requirements for industry consultants in terms of industry coverage and project and data reserves. On the other hand, there should be no geographical limitations, as manyGDRThe issuers are leading enterprises with a global footprint, targeting global investors. Industry consultants are needed who also have an in-depth research foundation on overseas markets.
*This interview was published on the "LIVE REPORT" official account, with the original title being " Exclusive Interview with Live Report|Frost & Sullivan Jia Pang:GDRThe boom will continue, and private Chinese enterprises are actively 'going global'. >> （👈Click the title to read the full report).
