21.03.2007
Focus on Asia: China regulates utilisation of IPO revenues
The Chinese securities regulator has taken measures which will attempt to hold back speculative buying. According to the China Securities Regulatory Commission one measure is destined to bar companies from using IPO revenues to reinvest in shares. Listed companies now have the obligation to use IPO revenues as stipulated in the issuing prospectus, unless their shareholders decide otherwise. Furthermore, the Regulatory Commission announced that companies would be subject to a closer monitoring.
This decision by the Regulatory Commission is motivated by the fear that the present IPO practice could further fuel the stock-market frency. The Chinese government wants that IPO revenues are to be reinvested in the companies itselves or distributed as dividend payments. This year Zhengzhou Yutong Bus and the real estate developer Finance Street Holding had announced their intention to use their own IPO revenues for reinvestment in IPOs of other corporations.
In February the Chinese goverment had given green light to the creation of a special task force to curb illegal IPO practices. In the last twelve months shares had been issued with a value of $24.4 bln.
Source: Neue Zürcher Zeitung
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