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The "withdrawal wave" is intensifying. Since June, the three exchanges in Shanghai, Shenzhen, and Beijing have seen 24 companies terminate their IPOs.

Yicai, based on data from Tonghuashun, found that this year, more than 200 companies planning to go public have terminated their IPOs (including withdrawals, failures in review, etc., the same below), setting a historical record.

In response, Tan Gefei, Chief Consulting Expert at Shenzhen Elephant Investment Consulting Co., Ltd., told Yicai that due to factors such as performance and new rules for listing, a high number of terminated reviews will be the norm for a period in the future, which is also the process of rebuilding the new order of IPOs.

The number of terminated reviews sets a new high

Since February, the number of withdrawals from companies planning to go public has quietly increased, showing a monthly increasing trend. As of June 10, 202 companies have terminated their IPOs this year, far exceeding the 122 in the first half of 2023 and the 136 in the first half of 2022.

Looking at the distribution of the planned listing boards of the terminated companies, there are 41 on the Shanghai Main Board, 29 on the Shenzhen Main Board, 34 on the STAR Market, 53 on the ChiNext Board, and 45 on the Beijing Stock Exchange.

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Among these 202 companies, three have been in line for more than 1000 days, namely Shenzhen Jingchuang Technology Electronics Co., Ltd. (hereinafter referred to as "Jingchuang Technology"), Dongguan Liuchun Intelligent Technology Co., Ltd. (hereinafter referred to as "Liuchun Technology"), and Ningbo Boling Electric Appliance Co., Ltd. (hereinafter referred to as "Boling Electric").

It is worth noting that all three companies have passed the review before. For example, Jingchuang Technology passed the review in August 2022, Liuchun Technology passed the review on July 27, 2022, and Boling Electric passed the review on November 4, 2022. However, after passing the review, these three companies have not submitted their registration until the review was terminated.

Compared with the past two years, the cases of companies that have passed the review and have actively withdrawn their IPO materials have gradually increased this year. In addition to the above three, Huayi Shares, Zhejiang Control Valve, Goer Micro, Syngenta, and Polymer Technology are also similar situations.

In addition, the company from Dongguan, Sisuo Technology, set the fastest withdrawal record after the full implementation of the registration system. From being accepted by the exchange on December 28, 2023, to applying for withdrawal on January 26, 2024, it was only a short 29 days, and it was called the fastest "flash retreat" in the IPO.Regarding the significant increase in the number of enterprises terminating the audit process, Tan Gefei stated that the economic environment has a considerable impact on the operational status of businesses, and performance, as one of the key fundamentals of a company, is a focal point of regulatory attention. Unstable revenue and profits, and the inability to ensure sustained growth in performance, are the main reasons why companies are proactively terminating their IPOs at present.

Additionally, with the promulgation and implementation of new rules for issuance and listing, the audit environment has also undergone changes. For instance, the new "Nine National Articles" explicitly propose to include pre-listing "fire sale" dividend distributions and similar situations in the negative list for issuance and listing. "Some enterprises with flaws, non-compliance with new regulations, or those needing to supplement and adjust under the new audit environment can only withdraw their applications. It is not ruled out that some companies may choose to reapply or switch to an IPO at a later opportunity," said Tan Gefei.

The implementation of new regulations has led to some companies not "meeting the standards."

On April 30, the Shanghai and Shenzhen stock exchanges officially released new rules for issuance and listing, which include strengthening market entry controls, raising financial indicators for issuance and listing, improving sector positioning requirements, enhancing the audit of financial authenticity, increasing on-site supervision, regulating pre-listing "fire sale" dividend distributions, and tightening the responsibilities of intermediaries.

Among them, in terms of financial indicators for issuance and listing, the main changes are increasing the cumulative net profit indicator for the first set of listing standards on the main board from 150 million yuan to 200 million yuan over the past three years, the net profit indicator for the most recent year from 60 million yuan to 100 million yuan, the net cash flow from operating activities over the past three years from 100 million yuan to 200 million yuan, and the cumulative business income over the past three years from 1 billion yuan to 1.5 billion yuan; for the first set of listing standards on the Growth Enterprise Market (GEM), the net profit indicator for the most recent two years is increased from 50 million yuan to 100 million yuan, with an additional requirement that the net profit for the most recent year should not be less than 60 million yuan, highlighting the company's risk resistance capabilities, etc.

From a financial performance perspective, the average business income of the aforementioned 202 companies that terminated their IPOs in the most recent fiscal year is 2.4 billion yuan, and the average net profit is 100 million yuan. There are 13 companies that ended their IPOs with a net loss in the most recent fiscal year, 11 of which are from the STAR Market, one from the Shanghai Main Board, and one from the Beijing Stock Exchange.

The average net profit of the companies that terminated their IPOs on the main board in the most recent fiscal year is 169 million yuan, among which 23 companies have a net profit of less than 100 million yuan in the most recent fiscal year. The average net profit of the companies that terminated their IPOs on the GEM in the most recent fiscal year is 120 million yuan, among which 8 companies have a net profit of less than 60 million yuan in the most recent fiscal year.

For example, Tangxing Technology, which withdrew its application on May 8, chose the first set of listing standards on the GEM, but the company's net profit after deducting non-recurring gains in the most recent fiscal year (2022) was 59.7024 million yuan, below the 60 million yuan threshold.

Yuancheng Technology, which withdrew its application on June 10, had a net profit after deducting non-recurring gains of 50.6557 million yuan in the most recent fiscal year (2022), also below the 60 million yuan threshold. Moreover, the company's net profit after deducting non-recurring gains in the first half of 2023 was only 14.3767 million yuan, far from the annual threshold of 60 million yuan.

The regulation of "fire sale" dividend distributions by companies planning to go public is a highlight of this issuance and listing regulation. In fact, before this, some companies planning to go public have already caused market controversy and widespread discussion due to large dividend distributions.According to the specific criteria for "clearance-style" dividends clarified by the new listing rules: that is, the cumulative dividend amount over three years of the reporting period accounts for more than 80% of the net profit during the same period; or the cumulative dividend amount over three years of the reporting period accounts for more than 50% of the net profit during the same period and the total dividend amount exceeds 300 million yuan, while the combined proportion of replenishing working capital and repaying loans in the raised funds is higher than 20%.

After the release of the new rules, several companies may have withdrawn their applications due to touching this "red line." For instance, Yintai, which terminated the review on May 9, had a cumulative cash dividend of 352 million yuan during the reporting period, with a total net profit of 394 million yuan, resulting in a dividend amount that accounts for as high as 89% of the net profit during the same period. Additionally, the company planned to raise 1.096 billion yuan through an IPO, with 300 million yuan allocated for supplementing working capital, representing a proportion of 27%.

On June 3, Zhongzhi Shares, which terminated the review, had a cash dividend of 3.537 billion yuan during the reporting period, with a cumulative net profit of only 3.172 billion yuan during the same period, making the dividend amount account for 111.50% of the net profit during the same period. At the same time, the company planned to raise 3.742 billion yuan through an IPO, with 800 million yuan allocated for supplementing working capital, representing a proportion of 21.38%, also touching the dividend "red line."

Furthermore, Jiey Technology, which terminated the review on April 24, had a cash dividend amount during the reporting period that accounted for 95% of the sum of the net profits during the same period; and Great Wall Precision Engineering, which terminated the review on April 26, had a cash dividend amount during the reporting period that accounted for 81% of the sum of the net profits during the same period.