Observations of A-Share Refinancing in the First Half of 2021

The A-share market has seen an increase in the number of refinancing deals in the first half of 2021, as reflected by the statistics released by Anbound recently. The increase occurs with changes triggered by the relaxation of refinancing regulations, most notably including:

The number of private placement deals continues to rise.

With the issuance of the new refinancing regulations in 2020 that relax requirements for private placement in terms of pricing, lock-up period and exemption of shareholding reduction restrictions, the private placement market has become increasingly active. As of June 22, 2021, a total of 179 private placement deals have been completed, an increase of 54% over the same period of 2020 (116 deals); moreover, a total of 766 listed companies have announced plans for private placement, with a total of funds raised reaching nearly 1,504.838 billion yuan.

The review time has been significantly shortened.

Echoing a registration-based stock issuance review system and with the implementation of a review procedure “fast-tracked for moderate scale financing”, the review time required has been significantly shortened. One securities broker commented that it has become the fastest in history.

Bidding-based issuance has gradually become the norm, while the thresholds for strategic investors participating in a fixed-price issuance being tightened.

Following the issuance of new refinancing regulations, regulators also clarified the determining criteria for strategic investors in private placements, proposing high standards for recognizing strategic investors based on multiple elements, such as industry relevance, willingness to hold shares, and involvement in corporate governance etc., all of which makes it harder to become qualified as a strategic investor. As a result, the number of fixed-price issuances commonly executed by strategic investors in the past has dropped significantly, while bidding-based issuances gradually became the norm. Since the beginning of this year, the amount of funds actually raised by bidding-based issuances has reached 253.6 billion yuan in total, twice that by fixed-price issuances.

The average price discount for bidding-based issuances is 16%.

In terms of the price discount, the average price discount for bidding-based issuances since the promulgation of the new refinancing regulations is 16%. The actual discount may be even higher for most emerging industries.

The number of terminated private placements has correspondingly increased.

While the number of private placements has risen significantly, the number of terminated private placements has correspondingly increased. As of June 22, 2021, a total of 100 listed companies have made announcements to stop implementing their private placement plans, mainly due to regulatory inquiries, issuance prices or upside-down stock prices, compared with a total of 72 over the same period last year.