Chinese tech companies are gearing up for the launch of Shanghai’s new technology innovation board. ‘Internet of Things’ start-ups are set to be the greatest beneficiaries when it goes live in a few months’ time.
The new board will adopt a registration-based IPO system. Most importantly, the rules lower the listing threshold with a focus on R&D credentials instead of profits, which allows companies that are yet to make a profit to list.
It also increases the portion for offline allotment - all good news for technology startups in China.
Investment banks have already received a notice from the Shanghai Stock Exchange that the auditing system of the new board was ready to accept the official application from companies on Monday.
The new technology innovation board is expected to see the greatest number of applications from advanced information technology and manufacturing companies - the majority of them IoT-related. Companies that are looking for fresh growth capital are eager to apply to bypass China’s complex and red tape-induced old IPO process.
Terminus, an artificial intelligent IoT platform is one of those that has expressed interest in listing on the technology innovation board, as it perfectly fits into the state-recommended industries to list. Incubated with funding from state-owned China Everbright Limited, the startup is expected to reach unicorn status when it completes its IPO.
“The new technology innovation board offers unprecedented opportunities for tech startups to access capital much more quickly than was previously possible,” said An Ren, investment officer in Everbright's new economy team and board secretary of Terminus. “It is also an encouragement for reform in the Chinese capital market, and an ideal route for Terminus and our portfolio companies.”
An said that there are 20 unicorn companies among the investees of the new economy fund under China Everbright. The fund is closely monitoring updates from the technology innovation board and has been in touch with some large brokerage houses.
The reason why IoT companies will be placed first to list on the technology innovation board is for their wide application and the huge industrial chain that they use. And IoT companies can easily connect the whole industry chain with surveillance equipment, base station and chips supply, as a lot of upstream equipment makers will be involved.
Terminus, for example, has already cooperated with many local governments and corporations across 70 Chinese cities, with more than 8,000 on-going projects.
Governments welcome its IoT platform as it can upgrade a city's management. “We have received an increasing number of inquiries from governments,” said Xie Chao, vice president of Terminus.
As a candidate for the technology innovation board, it helps that Terminus said that it has already begun to make a profit.
IoT-related companies, including chip makers and those that work with artificial intelligence, are the most likely companies to be the first to list on the new board.
According to a recommended list from CCID Consulting, a research firm under the Ministry of Industry and Information Technology, there are 35 IoT-related companies on the 69-strong recommended list.
Famous unicorns such as SenseTime, Megvii, Cambricon and Horizon Robotics are all included. The list was based on a company’s technology, market potential and valuation.
The market is looking forward to more openness and possibilities. The new board has also grabbed the attention of international investors. “Authorities can perhaps do a bit more to introduce international institutional investors,” said Li Qiang, co-regional managing partner of DLA Piper.
“The Chinese stock market is currently heavily dominated by retail investors. If international institutional investors are attracted to the technology innovation board, that will be an improvement. I don’t think that that has been talked about enough.”