As the harsh winter of real estate approaches, the pan-home furnishing industry has set off a craze for listings; at the same time, against the background of macroeconomic downturn and investment contraction, IPO review has become increasingly strict, and many companies have repeatedly suffered setbacks on the road to IPO. As of now, 3 companies in the pan-home furnishing circle have terminated their IPOs, 6 companies have suspended IPO review, and 4 companies have the latest developments in the IPO process.
IPO sudden "stop wave", more than 80 companies were involved
Previously, the IPO review status of more than 80 companies that were queuing for listing was changed to "suspended", 6 of which were home building materials companies. On March 31, an announcement released by the Shenzhen Stock Exchange showed that six pan-home furnishing companies, Tubatu, Zhiou Home Furnishing, Youwu Intelligence, Haojiang Intelligent, Senying Window Industry, and Tianzhen Co., Ltd., were all listed in the IPO application documents. The financial information has expired and needs to be submitted additionally. According to relevant regulations, the Shenzhen Stock Exchange suspended its issuance and listing review. In addition to this suspension, the IPOs of Tubatu and Senying Window Industry have gone through three suspension reviews. It can be said that the road to listing has been full of changes.
On January 14, 2021, Tubatu initiated a listing application to the Shenzhen Stock Exchange, but due to expired financial information, the listing review was suspended by the Shenzhen Stock Exchange on September 30, 2021; on November 18, 2021, Tubatu The financial information update was completed and the listing review was resumed; on January 26 this year, the Tubatu IPO was suspended again because the issuer’s lawyer, Beijing King & Wood Mallesons, was investigated by the China Securities Regulatory Commission. It was not until February that Tubatu's review status was restored again after Beijing King & Wood Mallesons issued a review report.
One month later, Tubatu fell down twice in the same pit, and was once again suspended from review due to expired financial information. The two "suspended" review status of Zhiou Home Furnishing's listing and issuance were both due to expired financial information. Even though the IPOs of Senying Window Industry and Tianzhen Co., Ltd. successfully passed the meeting not long ago, they were still forced to suspend the review due to the same problem.
The "Shenzhen Stock Exchange GEM Stock Issuance and Listing Review Rules" stipulates that the validity period of the prospectus is 6 months, starting from the date of the last signature before the public offering. The issuer shall use the valid prospectus to complete the issuance. The financial statements referenced in the prospectus are valid for a period of six months after the closing date of their latest period. Under special circumstances, the issuer may apply for an appropriate extension, the extension shall not exceed 3 months. Financial statements should be ended at the end of the year, half-year, or quarter.
Wang Jiyue, a senior investment banker, said that it is common for the review to be suspended due to financial report updates. The supplementary listing materials after the third quarterly report are usually completed from the end of October to the beginning of November. It takes a lot of time for some companies to submit financial report materials, causing the IPO financial report review to exceed the validity period, and the company needs to resubmit and go through the listing financial report review process.
Many IPOs have been terminated, and 2 companies have withdrawn voluntarily
Since the first quarter of 2022, a total of three pan-home furnishing companies have terminated their IPOs. Among them, Sanwen Home Furnishing and Differ Co., Ltd. have voluntarily withdrawn their listing applications.
On January 4, Sanwen Home Furnishing submitted the "Application for Withdrawal of the Application Documents for the Initial Public Offering of Stocks and Listing on the GEM of Sanwen Home Furnishing Co., Ltd." to the Shenzhen Stock Exchange, and then the Shenzhen Stock Exchange terminated the initial public offering of Sanwen Home Furnishing Co., Ltd. Review of issuance of shares and listing on GEM. Sanwen Home Furnishing has also become the first company this year to be terminated without registration after the meeting.
On March 19, Differ Co., Ltd. issued an announcement stating that it planned to terminate its application for public issuance of shares to unspecified qualified investors and listing on the Beijing Stock Exchange, and at the same time withdrew relevant application materials. As for the reason for withdrawing the listing application, Dingfeng shares stated that it was due to future strategic adjustments and planning for the capital market path.
Shen Meng, executive director of Chanson Capital, said: "IPOs of non-technological innovation companies have a large review time cost, and cases of withdrawing and terminating IPOs after the meeting are rare in A-shares. However, it illustrates corporate operations from the side. The situation and development are expected to undergo major changes.”
Some experts in the industry believe that the voluntary termination of IPOs by some companies is due to the impact of multiple external environmental factors such as the epidemic. Ge Zexi, director of investment banking at West China Securities, analyzed, "Affected by domestic and foreign epidemics, rising raw material prices, rising shipping costs and other factors, some companies planning to be listed have encountered difficulties in production and operation, and their financial data have difficulty meeting listing standards."
It usually takes more than a year from the preparation of IPO application to the review stage. This lag has little impact under the previous steady economic growth. However, under the influence of the above-mentioned economic factors, some companies have experienced changes in their operations and performance. The serious decline resulted in the company not meeting listing standards, so it voluntarily withdrew its IPO application.
Some market participants also pointed out that one of the main reasons behind companies voluntarily withdrawing their applications may be that the application information is false and the company has negative information such as non-compliance with environmental protection standards, tax evasion and legal proceedings. In response to the phenomenon of companies "entering the market while sick", many exchanges stated that if it is found that there are suspected financial fraud, false statements and other major violations of laws and regulations in projects that were withdrawn before entering the site during on-site inspection, the sponsors and issuers must We must assume corresponding responsibilities and never "just withdraw", nor are we allowed to "break through while sick."
How difficult is it for ceramic companies to go public?
Compared with other home furnishing companies, it can be said that it is even more difficult for ceramic companies to go public. Real estate regulation, environmental protection issues, overcapacity and financial transparency issues are the four major problems that ceramic companies need to solve when going public.
However, no matter how difficult it is to go public, it still cannot stop ceramic companies from pursuing IPOs. So far, there are 7 listed companies in the construction and sanitary ceramics industry, namely Haiou Residential, Yuexin Health, Diou Home Furnishing, Huida Sanitary Ware, Mona Lisa Group, Dongpeng Holdings, and Tianan New Materials. Among them, they really only focus on There is only one manufacturer of architectural ceramics, Mona Lisa Group. Since then, many ceramic companies have proposed listing plans and joined the listing queue.
In September 2021, Marco Polo and Xin Mingzhu successively applied for counseling registration at the Guangdong Securities Regulatory Bureau. The counseling agencies were China Merchants Securities Co., Ltd. and Shenwan Hongyuan Securities Underwriting and Sponsoring Co., Ltd. respectively. Two major construction and ceramics giants, New Pearl Group and Marco Polo Holdings, have officially embarked on the journey of IPO listing. In addition, since 2021, Asia, Dajiaolu, and Shuncheng have also held IPO launch meetings.
As early as November 4, 2020, Wrigley Home Furnishings completed the counseling registration with the Guangdong Securities Regulatory Bureau. After encountering a 20,000-word “long article” and 61 “soul interrogations” from the China Securities Regulatory Commission, Wrigley Home’s IPO review status has now been changed to “pre-disclosure update”, which means that Wrigley Home has returned to the normal review stage.
Mona Lisa took eight years to prepare for the listing and successfully went public. Dongpeng Holdings also went through more than 3 years of preparation and waiting before it successfully went public. Oceano saved the country through a curve by being acquired by a listed company. "The company was successfully listed in this way.
Listing is so time-consuming and laborious, why are there so many ceramic companies competing to go public?Woolen cloth?
Relevant persons from the Shenzhen Stock Exchange pointed out that listing will bring five effects to the company: financing effect, brand effect, governance effect, incentive effect and development effect. Through listing, companies can raise the required long-term development funds, improve their capital structure, develop direct financing channels, and continuously raise funds from the capital market through refinancing. In addition, the share circulation and equity incentives of listed companies can allow employees to share the value of corporate growth. Conducive to attracting and retaining talents. Yao Changshun, executive director of Shenzhen Jishi Ronghui Investment Co., Ltd., said: "When a company develops to a certain stage, if it does not go public, it will be difficult to give reassurance to senior executives and core backbones, so that these talents can develop with the company for a long time."
Of course, following the trend is also one of the reasons. Lawyer Chen Yong from Yingke Law Firm said, "Sometimes it is not the company itself that wants to go public, but its rivals that are equally matched are preparing to enter the capital market. If they do not follow suit, they may be distanced."
