Rethinking Listing Venues and Models
Interview with ALB Dealmakers of Asia 2021: Zhang Zhiqiang, Partner of Jingtian & Gongcheng
ALB: Congratulations on making the ALB Dealmakers of Asia 2021 list! What are some of your outstanding achievements in 2021?
Zhang Zhiqiang (Zhang): The capital markets has been generally volatile over the past year due to factors such as the international economic situation and related policies. In the process, we have continued to assist several companies in completing their IPOs and pre-IPO preparations. My team completed two A-share IPOs of Huatong Wires and Cables and Aoni Electronic, three A-share non-public offerings of Sinqi， LBX Pharmacy Chain, Yusys Technologies, and several overseas bond issuances including Haidilao. In addition, we also submitted one A-share IPO, three H-share IPOs (including one red chip and two H shares).
ALB: As a capital market expect, what's your view and advice on the choice of listing venues and models by Chinese companies?
Zhang: As China's capital market deepens reform and integrates with the international market, more and more companies turn to listing. Presently, choices of listing venues for Chinese companies mainly include the domestic A-share market and overseas markets of Hong Kong and the US. Each location provides different exchanges and listing sectors.
The eventual choice is the outcome of an enterprise comprehensively weighing the pros and cons of various factors. Given various differences exhibited by different distinctive venues, exchanges and sectors, enterprises should consider listing venues and models comprehensively in light of their own actual needs and characteristics, as well as the characteristics of relevant industries and policy priorities at the time.
An enterprise must consider some key points such as industry characteristics, its own equity structure features, costs for listing and restructuring, listing conditions and difficulty of listing review, review speed, lock-up period, market activity, investor recognition, business strategy integration, international environment, listing timing, etc., to ensure that the listing venue and model selected reflect its value and are suitable for its development.
It is important for an enterprise to keep normative and sustainable development. An enterprise must build up core competitiveness and improve and develop products or services rather than "listing for the sake of listing". When an enterprise matures and develops to a certain stage, listing will become a "natural" choice. Only then can the capital market achieve the goal of helping enterprises develop and operate sustainably.
ALB: What are some of the regulatory changes that affected the overseas listing decisions of Chinese companies in 2021? How do you help clients deal with regulatory uncertainty in the short to medium term?
Zhang: With the advancement of registration system reform in the domestic capital market and the domestic listing of red-chip companies, the domestic capital market is gradually shifting to be more market-oriented and has become an optional listing venue that more companies start to considering.
In terms of overseas listing regulation, the consultation draft on rules for overseas listing of domestic enterprises issued at the end of 2021 incorporate red-chip enterprises and H shares into unified record-filing regulation. Although therules are not officialized, this points to the direction of unified regulation of overseas listing by regulatory authorities. In addition, cybersecurity and data compliance will become significant factors to be considered. These changes will affect the decisions of Chinese companies to go public overseas.
Lawyers must first assist enterprises to maintain good and standardized sustainable development and help them respond to changing dynamics with consistency. Second, through professional experience and judgment, lawyers need to grasp current regulatory policies and trends for companies. Third, lawyers should retain more flexibility for structuring design during the early stages of assisting enterprises in their standardization and restructuring.