LED Display Company Financing Faces Huge Changes

- Apr 29, 2020-

Abstract: On April 27th, the thirteenth meeting of the Central Committee for Comprehensive Deepening Reform was held. The meeting reviewed and approved the "General Implementation Plan for the Reform of the Growth Enterprise Market and the Pilot Registration System." The GEM with a total market value of 6.8 trillion has finally ushered in the long-awaited registration system reform. This is a news that must be paid attention to for those LED display companies in the industry that are already listed, intend to list, or are preparing for listing.


   On April 27, the thirteenth meeting of the Central Committee for Comprehensive Deepening Reform was convened. The meeting reviewed and approved the "General Implementation Plan for the Reform of the Growth Enterprise Market and the Pilot Registration System." The GEM with a total market value of 6.8 trillion has finally ushered in the long-awaited registration system reform. This is a news that must be paid attention to for those LED display companies in the industry that are already listed, intend to list, or are preparing for listing.


   At present, China's capital market system mainly includes the main board, the small and medium-sized board, the GEM board, the new third board, and the new science and technology version launched last year. Except for the science and technology board that uses the registration system, all other sectors are subject to the approval system. Several major listed companies of LED display, in addition to Alto Electronics (002587) listed on the small and medium board, Lianjian Optoelectronics (300269), Liad (300296), Absen (300389), Zhouming Technology (300232), Lehman Optoelectronics (300162) is listed on GEM, and companies in related supporting fields that are closely related to the LED display industry are also listed on GEM. This GEM reform has an impact not only on listed display companies, but also on other LED display companies with listing plans, and more directly on those companies that are in the listing application process.


   On the 27th, the official website of the China Securities Regulatory Commission issued a message clarifying the transition arrangements for administrative licensing matters such as GEM IPO, refinancing, mergers and acquisitions and reorganization before and after the implementation of the registration system.


   According to the arrangement, from now on, the SFC will stop accepting applications for initial public offerings and listing on the GEM, but will continue to accept applications for refinancing and mergers and acquisitions and restructuring of companies listed on the GEM. Before the implementation of the GEM pilot registration system, the CSRC will normally advance the relevant administrative licensing work as required.


   For companies in the GEM IPO issuance review process, taking yesterday (April 27) as the boundary, if the company's IPO application has passed the review of the development review committee and has obtained approval approval, the issuance underwriting work will still be implemented according to the current regulations. If it has passed the review by the Development and Examination Committee but has not yet obtained approval, you can choose two ways: one is to continue to promote the administrative licensing process before the official release of the GEM pilot registration system, and start the issue underwriting in accordance with the current regulations; The other is to independently choose to apply to stop advancing the administrative licensing process. After the GEM pilot registration system is officially released and implemented, declare to the Shenzhen Stock Exchange, and after performing the issuance listing review and registration procedures, start the issuance underwriting work in accordance with the reformed system. If an enterprise chooses to declare to the Shenzhen Stock Exchange, the Shenzhen Stock Exchange shall arrange for the issuance review in accordance with the order of the enterprises under review by the CSRC.


   At present, LED display companies are very eager for capital, and listing is the financing channel that most companies dream of. Among the existing major listing sectors, the threshold for listing on the New Third Board is the lowest. However, due to the unsatisfactory financing effect, some of them have also actively delisted after listing. Therefore, most LED display companies have listed GEM as their target. After all, compared with the science and technology board, the main board and the small and medium board, the listing threshold of the GEM is relatively lower.


   Four major market listing conditions


   Motherboard / small and medium board:


   1. The net profit in the last three fiscal years is positive and the cumulative amount exceeds RMB 30 million. The net profit is calculated based on the lower one before and after deducting non-recurring gains and losses;


   2. The cumulative net cash flow from operating activities in the last three fiscal years has exceeded RMB 50 million; or the cumulative operating income in the last three fiscal years has exceeded RMB 300 million;


   3. The total share capital before the issuance is not less than RMB 30 million;


   4.The proportion of intangible assets (after deducting land use rights, aquaculture rights and mining rights, etc.) in net assets is not higher than 20% at the end of the latest period;


   5. There was no unrecovered loss at the end of the latest period.


   Pilot enterprises (hereinafter referred to as "pilot enterprises") identified by the China Securities Regulatory Commission in accordance with the "Several Opinions on the Pilot Issue of Launching Domestic Stocks or Depositary Receipts for Innovative Enterprises" may not apply the provisions of Items 1 and 5 of the preceding paragraph.


   gem:


   1. Continuous profits in the past two years, with a cumulative net profit of not less than 10 million yuan in the last two years; or a minimum one-year profit, with an operating income of not less than 50 million yuan in the most recent year. Net profit is calculated based on whichever is lower before and after deducting non-recurring gains and losses;


   2. The net assets at the end of the latest period are not less than 20 million yuan, and there is no loss to make up;


   3. The total share capital after the issue is not less than 30 million yuan.


   Pilot enterprises identified by the China Securities Regulatory Commission according to the "Several Opinions on Pilot Issues of Initiating Stocks or Depositary Receipts for Innovative Enterprises in China" may not be subject to the provisions of Paragraph 1 of the preceding paragraph and the provisions of "No unrecovered losses" in Paragraph 2.


   Science and Technology Board:


   1. The estimated market value is not less than RMB 1 billion, the net profit in the last two years is positive and the accumulated net profit is not less than RMB 50 million, or the estimated market value is not less than RMB 1 billion, and the net profit in the latest year is positive And the operating income is not less than RMB 100 million;


   2. The estimated market value is not less than RMB 1.5 billion, the operating income in the latest year is not less than RMB 200 million, and the cumulative R & D investment in the last three years accounts for no less than 15% of the cumulative operating income in the last three years;


   3. The estimated market value is not less than RMB 2 billion, the operating income in the latest year is not less than RMB 300 million, and the cumulative net cash flow from operating activities in the last three years is not less than RMB 100 million;


   4. The estimated market value is not less than RMB 3 billion, and the operating income in the most recent year is not less than RMB 300 million;


   5. The market value is expected to be no less than RMB 4 billion. The main business or products need to be approved by the relevant state departments, and the market space is large. At present, phased results have been achieved. Enterprises in the pharmaceutical industry need to have at least one core product approved for the second phase of clinical trials, and other companies that meet the positioning of the Science and Technology Board need to have obvious technical advantages and meet the corresponding conditions. At least one of the above conditions must be met.


   At the thirteenth meeting of the Central Committee for Comprehensive Deepening Reform on the 27th, it has been clearly pointed out that advancing the reform of the Growth Enterprise Market and the pilot registration system are important arrangements for deepening capital market reform, improving the capital market basic system, and enhancing the function of the capital market. The purpose is to create a standardized, transparent, open, dynamic and resilient capital market, promote basic system reforms such as issuance, listing, information disclosure, trading, and delisting, adhere to the development of the GEM and other sectors, and find out their respective positions To develop their own characteristics and promote the formation of a moderately competitive pattern with emphasis and complementarity.


   It can be seen that the GEM reform and pilot registration system is not a simple copy of the reform of the science and technology board, but a separate division of labor with the science and technology board to promote the formation of a moderately complementary and complementary competitive landscape. The Science and Technology Board is mainly positioned to serve "hard technology" companies, and the current industry distribution of listed companies on the GEM is relatively scattered. From this perspective, the GEM may be mainly aimed at soft technology and can achieve high growth but is more traditional. Pilot registration system for enterprises in the industry.


   The main changes in the entrepreneurial version registration system reform:


   1. New listing standards


   The first set of standards: profit in the past two years, the cumulative net profit is not less than 50 million yuan (currently, the cumulative net profit in two years is not less than 10 million yuan.)


   The second set of standards: the market value is expected to be no less than 1 billion yuan, profit in the latest year, and operating income no less than 100 million yuan.


   The third set of standards: allowing technology innovation companies to issue shares with special voting rights. It is required that “the profit in the latest year is expected to be no less than 10 billion yuan, or the profit in the latest year is expected to be no less than 5 billion yuan, and the operating income in the most recent year is not less than 500 million yuan.


   The fourth set of standards: Red chip companies that meet the relevant requirements of the innovation pilot and have been profitable in the most recent year are allowed to list on GEM. Among them, red silk enterprises that have independent research and development, international leading technology, and have a comparative advantage in the same industry, but have not been listed overseas, require "expected market value of not less than 10 billion yuan, or The market value is expected to be no less than 5 billion yuan, and the operating income in the latest year is not less than 500 million yuan. "


   The fifth set of standards: the market value is expected to be no less than 5 billion yuan, and the operating income in the latest year is no less than 300 million yuan. The standard will not be implemented for one year. Officially implemented, the profit requirements for enterprises with special equity structure and red-chip enterprises were simultaneously cancelled.


   Two and three major changes


   1. Cancel the requirement of "there is no unrecovered loss at the end of the latest period".


   2. Support the listing of enterprises with special equity structure and red-chip enterprises, and the market value and operating income requirements are consistent with the Science and Technology Board.


   3. Reserve space for the listing of unprofitable companies. It is expected that the listing requirements will be higher than that of the Science and Technology Innovation Board, and the timing of implementation will be evaluated after the implementation of the reform.


   3. Trading System


   There are no restrictions on the rate of increase or decrease within 5 trading days before the listing of new shares.


   Since then, the increase and decrease limits have been relaxed from 10% to 20% (stock stocks also apply)


   4. Investor Management


   Existing investors who have opened GEM investment: After signing a new risk disclosure letter, they can continue to trade GEM stocks.


   New account-opening investors: Add an entry threshold for the “average daily output of 100,000 yuan for the first 20 trading days + 24 months of trading experience”.


   V. Delisting


   Enrich and improve the delisting index, adjust the continuous loss of net profit index to the composite index of "the lower net profit before and after deducting non-recurring gains and losses is negative and the operating income is less than 100 million yuan", and add "market value for 20 consecutive trading days" The transaction delisting indicator of less than 500 million yuan and the standard delisting indicator of "significant defects in information disclosure or standardized operation that have not been corrected on schedule", etc.


   The financial delisting indicators are fully cross-applicable, and the delisting trigger period is unified to two years, increasing the clearance of "zombie" companies and shell companies.


   Simplify the delisting process, cancel the suspension of listing and resume listing, and the efficiency of delisting is expected to increase significantly.


   The listing of an enterprise is intended to achieve better development through capital operation, but there are also many companies that are listed for the purpose of listing. Popularly speaking, listing is to "circle money". After the goal, performance quickly "changed face." With the gradual standardization and improvement of the capital market basic system, the transparency and openness of the capital market will continue to expand, the space for enterprises to whitewash will become smaller and smaller. And for those water injection companies that have been listed, for companies that have major defects in whitewashing financial reports, information disclosure or standardized operations, it will be easier to trigger the delisting risk.