Changed PE game rules: Compliance pressure increases liquidity reduction Test LP

"I can cite an example. "Chen Wei, partner of Shanghai Kone law firm, said that there was a dollar PE fund client whose company was listed on the first list after the IPO opened in January 2014. The Fund's current focus is on the legality of the company's prospectus, "What we are often asked is ' will there be a problem with this disclosure '; Beijing has also observed changes. In the--2013 review of the global IPO market research Report and the 2014 outlook, Zhang Mingyi, a partner at the North China Audit Service at Ernst and firm, said the companies that had previously applied for IPOs were "very reluctant to look for services like Us", but now they have turned their heads and Proactively engage in such cross-border audit service providers. The reason for this change is offing's IPO new deal. According to the China Securities Regulatory Commission November 30, 2013 issued the "on further reform and improve the new issue system Guidance" (hereinafter referred to as the "opinion"), the introduction of new issue reform, clearly will be to the registration system over. This is very different from previous policies. Dongdengwen, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, explained that the comments changed the rules of the game, which would lead to changes in China's capital market environment and the IPO ecological chain. Xianggang, executive director of Shenzhen Australian Bank Capital (China) Holdings Limited (hereinafter "the Bank of Australia capital"), said: "The new issue from the approval system to the registration system," may lead to the restructuring of the PE industry competition pattern. In recently held several industry forum, the participant PE investor all thought: The new issue turns to the registration system, will push the PE industry to return "the value discovery" the essence. To facilitate this transformation, but also the corresponding supporting measures, Li Quansheng Capital founder, said that if the registration system, PE investment runway from the original aircraft carrier deck to the track and field, but LP (limited partner) still only want to harvest 35. "This kind of capital mismatch, will make the PE industry transition into a dilemma." "Compliance pressure Although there is no industry statistics, but PE agencies to attract professionals, is the undercurrent surging." Chen Wei definitely said: The last two years is a brokerage, and now the PE institution is the legal professionals of the huge demand side. The same goes for accountants and auditors. Why does this happen? The core of the registration system is information disclosure. According to the opinion, the issuer's prospectus is accepted by the SFC, i.e. disclosed on the CSRC website, from this moment to the end of the release. Li Quansheng pointed out that the IPO new deal to VC (venture capital)/pe fund the most direct constraint is to clearly define the listing of the main directors, supervisors, senior managers of the responsibility boundary, "as a shareholder, VC/PE in the application for the listing of the main body, often as directors, supervisors and other roles." According to the SFC, as of December 15, more than 40% of the 760 companies queuing up for IPOs have VC/PE investments. According to the opinion, if the issuer and its controlling shareholder recruitThere are false records, misleading statements or major omissions in the stock manual that led investors to judge wrongly that the company would be required to buy back all new shares in initial public offerings, even if part of the old shares that had already been transferred must be bought back. If such false records, misleading statements or major omissions cause investors to suffer losses in securities transactions, they will also be compensated for the loss of investors according to law. "This requires those of us who are likely to be on the board of directors and the entire Investment management team of VC/PE to be more responsible." "SoftBank China Capital (SBCVC), the head of the partner, said," China's a-share and international capital markets, the more integration of VC/PE fund managers will be higher. " This is one of the reasons why VC/PE institutions need professionals. Under the registration system, the disclosure of information content changes is another reason. Zhang Mingyi said that the registration system under the prospectus will be very different from the approval system, which means that the registration system under the disclosure of information will be different from the approval system. "Because of the registration system, two-level market investors should judge the quality and investment value of the company according to the information, so the information submitted by the issuer must be holistic and relevant." "In other words, the information should be directly related to the investment decision of investors, even if the financial information and non-financial information, can be combined into a whole, to describe the distribution of the main profit model, operating risk and so on." In the previous examination and approval system, management analysis, financial data, business conditions, challenges and other information are decentralized and isolated, there is no relationship between them. The opinion also stipulates that after the prospectus is disclosed, the relevant information and financial data of the issuer shall not be changed arbitrarily. In the course of the audit, if the information is found to be contradictory, or there are different statements and substantive differences before and after the same fact, not only the listing application will be suspended, the serious circumstances of the date within three years of the company will be out of the capital market. More importantly, VC/PE institutions need professionals to help them invest in companies. A long history of domestic PE fund company people said that their company will expand a 30-person investment support team, including legal, accounting, finance, consulting and so on professionals, "before we have cast management, but the registration system under the requirements become particularly prominent." This is not only to help enterprises to establish compliance requirements of the internal system. The registration system to the listing of the pace, pricing, listing models are returned to the main body, "to help them docking capital markets, such as better completion of the listing preview, to attract more and better investors, but also become our VC/PE investors important work." "Li Quansheng said. Return value investment IPO New deal to PE investment business The most direct influence, it is impossible to make money so easily. "In the Future China may also have this situation, you invest in the company listed, but it is possible that you still lose money, even have no way to exit." "Shenzhen Innovation Investment Group chairman Haitao Jin said. The opinions of the issuer and the controlling shareholder, the directors and senior managers holding the issuer's sharesThere are the following requirements: The above-mentioned people holding stocks in the lock expires within two years, its reduction price can not be lower than the issue value, if the 6 months after the listing of the company's 20 consecutive trading days close below the issue price, or after the listing of 6-month closing price is lower than the issue, the above-mentioned personnel held the shares of the lock regularly automatically extended at least 6 months. If the company's stock price is lower than the net assets per share in three years, the issuer and its controlling shareholder, company director and senior management must implement the stock price stabilization plan including repurchase, overweight stock and other measures. This forced PE institutions to focus on the quality of investment projects, but also forced PE institutions to develop real investment capacity, "including the discovery of the ability of valuable companies, including bargaining power." Haitao Jin said the two points had not been taken seriously before. As long as the company can enter the listing channel, PE institutions will certainly be able to make money, so the investment in the proposed stage of the company (PRE-IPO) in the domestic once popular. "The history of PE in domestic development is a history of investment plus speculation," said Warburg Pincus, a partner in China's capital management of SoftBank. "Different institutions have speculative costs, ranging from 55 to 37, despite their different investment strategies," he said. "Under the registration system, China's mainland A-share market PE (price/earning per Share, profit rate) will be closer to Hong Kong and other markets." If PE in the first-tier market to buy expensive, in the two market and can not sell a good price, only lose money. Xianggang said that the lack of value judgment led to the loss of money or even loss of the case, in the implementation of the registered capital markets abound. They have invested in a U.S.-listed company that has been on the market after a bad performance, and only a few cents a share in the retreat. The opinion makes it clear that regulators will no longer judge the issuer's profitability and the value of its investment, which is returned to investors. Gao Shanwen, chief economist at Shun Securities, explained that the most central change from the approval system to the registration system is that the number of listed companies will no longer be restricted by the regulatory authorities. With other conditions unchanged, the increase in supply will inevitably lead to a fall in market prices. However, the registration system cannot be one-step. "This process of change creates window-like opportunities. Xianggang, the bank's capital executive, said he had contacted at least three funds in the hope of taking some of the non quality projects that the bank's capital intends to sell, "and they hope to be able to push these companies to market and make profits in this window." "But the environment that supports the original investment logic will indeed no longer exist." "This is a very big challenge for us," he said. Xiao Bing, an investment partner in the morning, said that the shift to a more early investment and a merger of listed companies became a transformation option for local PE institutions. While this trend has emerged during the IPO pause, the registration system will be clearer. A study published by the company, a joint venture of the company, said that 66% of respondents had adjusted their investment strategy to "increase the proportion of early-stage projects" since 2012. "Under the approval system, local funds rarely cast realInnovative enterprises. "Xiao Bing explained that, because even the gem is also on the listed subject's profitability requirements, the more moderate enterprises are relatively easy to go public; with the implementation of the registration system, the RMB PE agency may be invested in a truly innovative enterprise. Referring to the experience of Europe and the United States, only such investment projects to the PE institutions to create huge returns. The change of the "runway" has to do with the professional transformation, is not the only challenge PE institutions. In particular, can the RMB PE fund manager find a LP that is willing to invest in such a professional investment strategy? If PE is to switch to a more early investment or even a merger investment, it needs to match a longer term fund. Li Quansheng explained that if the PE investment compared to the Take-off, the previous one or two-tier market arbitrage speculative renminbi PE fund, like running on the runway of the aircraft carrier. Generally, a fund has a lifetime of only 5 years, the first three years of investment, after three years of harvest. If you want to consider the early stages of investing, which means that the runway is transferred to the race track or even the marathon, then the fund for that life cycle is no longer appropriate. In the United States, the general Early investment fund cycle lasted for 10 years or even 12 years. "I doubt that China's wealthy individuals are willing to allocate assets to such illiquid assets. "Mr. Dongliang, the investment partner, said that to his knowledge, individual investors preferred the combination of fixed-income products, structured products, and even real estate funds. Novartis is an alternative investment research and consultancy agency in the mainland, and its clients include institutional investors, wealthy families and high net worth individuals. This is not only because the high net worth personal requirements of the investment assets have a high liquidity, easy to cash in, before the PE institutions to PRE-IPO and other speculative opportunities chasing, to some extent also because of this part of the LP to high liquidity requirements. During the setback in 2013, the study showed that up to 30% of the PE fund managers surveyed appeared to have the LP transfer the PE assets and withdraw from the fund. More importantly, the assets, "can also bring them a good return." Wang Dongliang said. Data show that the PE industry in the past 10 years to the LP created by the average annual return rate of 20%. But nearly 90% of the funds raised since 2008 have not yet returned money to investors. However, for fund managers who invest in PE at home, high net worth individuals are a topic that they can't get around when they raise funds. Research reports show that up to the first 11 months of 2013, China's PE market has a total of 8,363 LP, of which rich family and high net worth individuals accounted for half. And in Europe and the United States dominate the various types of institutions LP, in the domestic but very few pitiful. The highest proportion of these are asset managers, accounting for 2.1% of the total, and a poor 0.1% for corporate pensions. On the one hand, the transition from the IPO new Deal pressure, on the other hand, can not find matching funds. Can China's PE industry be successfully transformed? December 1, 2013, director of the China Securities Regulatory Commission Research Center Qi bin in a public speechSaid the reform of the securities market would be a prelude to financial reform. To promote the development of VC/PE institutions, the final result is to solve the small and medium-sized enterprises financing difficulties, to solve the huge domestic private capital of the two Great Lakes, but also need a variety of ancillary reform measures issued.