Home Listing rules China to implement IPO firewall between bankers and analysts

China to implement IPO firewall between bankers and analysts

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CONFLICT OF INTEREST:
Investment bankers should be prohibited by rules from discussing earnings estimates and valuations with analysts as part of an IPO deal

China’s securities association has drafted rules to set up a firewall between investment bankers and analysts in deals to ensure unbiased pricing of initial public offerings (IPOs), Shanghai reported yesterday. SecuritiesNews.

Bankers involved in an IPO deal are barred from discussing earnings forecasts and valuations with analysts, who are expected to draw conclusions independently, the paper said, citing rules drafted by the Securities Association. of China.

Brokerages should also regularly check their internal firewall systems, according to the rules, which were distributed to brokerages for their input, the newspaper said.

Such rules would prevent price distortion from IPOs, protect the interests of investors in a market crucial to funding innovation and growth in the world’s second-largest economy, he said.

China has adopted a US-style registration-based IPO system in parts of its stock market to make stock pricing more market-driven, with plans to soon expand the reform across the board. of the market.

A company’s valuation report is increasingly important in such an IPO system, but analysts have insufficient levels of independence to write such reports, some of which are grossly inaccurate in their projections, the newspaper said, citing the China Securities Association.

To avoid conflicts of interest, investment bankers would be prohibited by rules from discussing earnings estimates and valuations with analysts as part of an IPO deal, although they could communicate about the issuer’s bases in the presence of compliance officers, the newspaper said.

The rules also prohibit issuers, investment bankers and salespeople from pressuring analysts to skew their research findings, he added.

Separately, Calb Co (中創新航), a Chinese supplier of batteries to electric vehicle makers, plans to seek approval from the Hong Kong Stock Exchange for an IPO in the territory as early as this week, officials said. people close to the file.

The Jiangsu, China-based company could be scheduled for a listing hearing tomorrow, said the people, who asked not to be identified because the information is private.

Calb could raise up to $2 billion in the IPO if it fully exercises its over-allotment option, the sources said.

Deliberations are ongoing and Calb’s listing hearing could be further delayed as IPO details are subject to change, the sources said.

An outside Calb representative did not immediately respond to requests for comment.

Founded in 2007, Calb manufactures lithium batteries for electric vehicles and other products. It operates major production bases in China, including Changzhou, Xiamen and Wuhan, according to its website.

Calb filed for an IPO in Hong Kong in March with Huatai International Ltd (華泰國際) as the sole sponsor of the deal.

At $2 billion, Calb’s IPO could be the second-largest in Hong Kong this year, behind the $2.1 billion listing of China Tourism Group Duty Free Corp (中國旅遊集團中免), according to data compiled by Bloomberg.

China Tourism Group Duty Free suspended a potential $5 billion listing in Hong Kong in December last year, joining a host of companies that chose not to strike deals in a turbulent market.

The seller of tax-exempt goods such as tobacco, wine and perfume to travelers has considered relaunching the enrollment plan to seek up to US$3 billion, Bloomberg News reported in June.

The duty-free company successfully sold Hong Kong shares as Hainan Island, a major tourist destination in China and the source of most of the company’s sales, saw one of the worst outbreaks of COVID-19. 19 of the country since the Shanghai lockdown earlier this year.

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