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CHINA NPC: Regulator Mulls Letting Firms Sell Existing Shares In IPOs
Published on: 2010-03-08
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BEIJING (Dow Jones)--China's securities regulator is considering allowing a company's existing shareholders to sell their holdings when the firm carries out an initial public offering, to lower the tendency of companies to raise more funds than necessary when they list, an official at the regulator said Sunday.

At present, a company seeking a listing is only allowed to sell new shares in its IPO, while its pre-listing shareholders are subject to lockup periods on their holdings after the company floats.

The China Securities Regulatory Commission plans to revise this rule as part of its reform of share-issuance regulations, CSRC Assistant Chairman Zhu Congjiu said.

"Currently, there's a tendency for Chinese companies to raise more funds than necessary" in an IPO, because limited share supply would drive up the IPO price, Zhu said during a news conference on the sidelines of the National People's Congress. "If the original shareholders can sell their holdings during an IPO, this problem can be alleviated."

He didn't say when the CSRC might make the rule change.

Zhu also said the regulator would make amendments to the rules governing the IPO approval process and the price-setting process for IPO shares. He didn't elaborate.

He said as China's A-share market is becoming more freely tradable, merger-and-acquisition activities will increase.

"A freely tradable market gives state-owned companies the opportunity to improve their business structure by making it possible for them to buy large chunks of other companies in the secondary share market," Zhu said.

He said that following rule changes six months ago, the market now has the final say on the pricing of IPO shares.

"We, as a regulator, are no longer giving window guidance on how a new share should be priced. The process is now left to the listing candidate, its underwriter and investors to decide," Zhu said.

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