(Yicai Global) May 10 -- Hit by a number of factors including Covid-19 outbreaks and a market downturn in China, more than 160 Chinese firms have halted plans for initial public offerings this year, according to Yicai Global’s calculations.

Some 108 companies have paused their IPO reviews for the Nasdaq-style ChiNext board of the Shenzhen Stock Exchange, making it the most-affected market.

Since the start of the year, 32 firms have halted procedures for listing on the Shanghai Stock Exchange’s Star Market, along with three hoping to join the SSE’s main board and seven aiming for the Beijing Stock Exchange, according to publicly available data.

In addition, six have stopped listing-related registrations on each of the Star and ChiNext markets.

Since the end of last year, the benchmark Shanghai Composite Index [SHA: 000001] has declined 17 percent to 3,035.84 points, as of today’s close, while the Shenzhen Composite Index [SHE: 399001] has slumped 27 percent to 10,912.74.

Covid Effect

The impact on Star Market listings of renewed outbreaks of Covid-19 in the country also has been clear. Twenty-one of the 32 firms halting their IPO reviews since the start of the year have suspended them because their earnings reports have expired, requiring them to be updated. The remaining 11 quit due to the impact of the coronavirus, accounting for 34 percent of the total.

Among the 108 companies that have suspended their listing reviews on the ChiNext, seven have been adversely affected by Covid-19.

The pandemic has stopped investment bankers from traveling to finish due diligence checks, making it difficult to carry out work related to corporate listings, the investment banking department head at one brokerage told Yicai Global.

Hengpu Tech

On May 6, the status of Hubei Hengpu Technology’s Star Market IPO review was changed to ‘suspended’ because the firm and its intermediaries were unable to complete due diligence and reply to audit inquiries within the prescribed time period due to the pandemic. So it applied to the bourse for a halt to its review.

Moreover, companies wanting to land on the capital market often show ‘the best’ side of their operating performances in order to list smoothly. However, repeated Covid-19 outbreaks are constantly challenging the firms’ financial performances.

For instance, the listing registration status of Hongcheng Technology Development, which has passed review, is now ‘halted.’ A firm in adult education and educational informatization, Hongcheng has disclosed the reason for the suspension as the expiration of its earnings report.

But because one of Hongcheng’s main businesses, off-campus learning centers, is mainly concentrated in the provinces of Jiangsu, Zhejiang, Guangdong and Jilin as well as Shanghai and Beijing, which have seen successive waves of Covid-19 outbreaks this year, it is expected that its business will be significantly impacted.

Timing Impact

Industry insiders believe that the downturn in the secondary market and the frequent sub-par IPO debuts will also affect the timing of listing by firms and intermediaries.

The pandemic will impact the pace of public offerings, but the influence of the market itself will be much greater, Wang Jiyue, a veteran investment banker, told Yicai Global.

A total of 121 stocks debuted on the Chinese mainland market by the end of April and 36 of them declined below their issue price on the first trading day, figures from financial data platform Wind showed. The average decline was 30 percent.

Editors: Xu Wei, Peter Thomas