11month16Yesterday, BYD's termination of the listing of its subsidiary BYD Semiconductor drew market attention. Data shows that since2019Since the release of the regulations on domestic spin-offs in [year], as of11month17day, already15Listed Company “Atake apartA"The plan has been shelved, and the initiative to terminate the spin-off listing of subsidiaries mainly includes reasons such as sub-listed companies not meeting performance targets and expanding new businesses.
Independent of the subsidiaryIPO listingIn comparison, what are the differences between spin-offs and initial public offerings (IPOs)? What are the advantages? Why has there been a noticeable increase in the termination of spin-off IPOs this year? How should we view some companies expressing their desire to split into separate companies again, and some companies that are already in the process? Frost & SullivanFrost & SullivanLu Jing, Partner and Managing Director of Frost & Sullivan Greater China, who is also the author of this article, was interviewed by Securities Daily to discuss the pros and cons of spin-offs and listings of subsidiaries.
Securities Daily
Q
Independent of its subsidiariesIPO listingIn comparison, what are the differences between a subsidiary's spin-off listing and an initial public offering (IPO), and what are their advantages?
IndependentIPO listingIn comparison, splitting and listing subsidiaries with strong profitability and growth potential has the following advantages:
1It can further broaden financing channels and improve cash flow, which not only helps alleviate the financing pressure on the parent company but also enables both the parent and subsidiary to obtain more reasonable valuations, achieving optimization of capital structure and equity structure;
2Subsidiaries can independently raise funds and use them to implement equity incentives and shareholding plans, expand the industry, promote technological innovation and industrial upgrading, and enhance their professional management level and overall competitiveness of the company.
Q
In light of the changes in both domestic and international situations over the past two years, please share your views on the reasons for termination. Why has there been a noticeable increase in terminations this year?
2022In [year], the economic downturn caused by the pandemic led to insufficient corporate vitality. The poor operating performance of subsidiaries and the strengthened supervision by the China Securities Regulatory Commission over spin-off listings restricted the process of corporate spin-offs.The majority of companies that are split into separate listings do not meet the conditions for such a split, such as declining performance, transfer of control from the parent company, excessive proportion of net profit from subsidiaries, or insufficient independent operating time.
The split listing carries a high risk of listing review. To prevent companies from chasing the trend of split listing, the China Securities Regulatory Commission (CSRC) has clearly stated that it will strengthen the full-process supervision of split activities and severely crack down on market anomalies such as 'foolish' split listings, false splits, speculation about split concepts, as well as illegal and irregular activities such as insider trading and market manipulation. For example, there are issues such as insider trading and profit transfers during the split listing process, as well as competition and related-party transactions between the parent company and the split-listed company in the same industry.
Q
How do you view the expressed intention of some companies to split and go public again, with some companies already taking action?
The listed subsidiaries of the spin-off are mostly focused on emerging economies such as new energy, computer science and technology, semiconductors, biomedicine, and mechanical equipment. Their main businesses possess strong 'science and innovation attributes'."These industries often require substantial capital investment to achieve economies of scale and technological iteration. Expanding financing channels through spin-offs and listings is an important path for these enterprises to achieve leapfrog development.
In recent years, affected by the downward pressure on the economy and the tightening review efforts of the China Securities Regulatory Commission (CSRC), some companies have terminated their process of spin-off listing. And along withAAs the number of diversified operating companies in the stock market gradually increases and the market trading and regulatory environment matures, on the basis of the gradual recovery of the macroeconomy and the further consolidation of enterprises' own strength, companies will restart spin-offs for listing to allocate resources and restructure assets, aiming to maximize corporate value.
*This interview was published in 'Securities Daily', with reporter Xing Meng, and the original title is "The15The listed company has terminated “Atake apartA"Plan Some companies intend to restart at an opportune time （👈Click the title to read the full report).
