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A year after passing the listing review, Jiangxi Copper Foil withdrew its application for an initial public offering (IPO).

Jiangxi Copper announced on June 4th that, considering the current market environment and other factors, in order to coordinate the business development of its holding subsidiary, Jiangxi Copper Foil, the company plans to terminate the spin-off of Jiangxi Copper Foil to the Growth Enterprise Market (GEM) and withdraw the relevant IPO application documents.

Prior to this, Jiangxi Copper Foil's IPO application had been approved by the Shenzhen Stock Exchange's (SZSE) Listing Committee in June of last year. On March 31st of this year, the review was suspended by the SZSE due to the expiration of financial documents that required supplementary submission.

In addition to Jiangxi Copper Foil, several other listed companies, including Goertek, Wolong Electric Drive, and Zhengzhou Coal Mining Machinery, have also terminated the spin-off listing plans of their subsidiaries. The companies cited the current market environment as the reason for termination.

Ten companies have terminated spin-off listings

Data from Tonghuashun shows that, including Jiangxi Copper Foil, at least ten listed companies have terminated the spin-off listings of their subsidiaries and withdrawn their IPO applications this year. Compared to the same period last year, the number of companies terminating spin-off listings has doubled.

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On May 22nd, Goertek disclosed that it had terminated the spin-off of its subsidiary Goertek Micro to the GEM and withdrew the relevant IPO application documents. As early as October 2022, Goertek Micro had passed the review of the Listing Committee, and on May 27th of this year, the SZSE terminated the review due to the withdrawal of the listing application by the company and its sponsor.

Before terminating the spin-off listing, in addition to the two companies mentioned above that had passed the review of the Listing Committee, the IPO applications of four subsidiaries of Zhengzhou Coal Mining Machinery, Weichai Power, SAIC Motor, and HAN'S Laser had all been accepted and inquired about. Wolong Electric Drive, Walin Nuclear Materials, Topband, and Kelda Manufacturing, on the other hand, were still in the preparation stage for the spin-off listing.

Zhengzhou Coal Mining Machinery, which announced the termination of the spin-off in April, stated that, considering the current market environment and other factors, in order to coordinate the business development and capital operation planning of Hengda Smart Control, after full communication with relevant parties and careful consideration, it was decided to terminate the spin-off of Hengda Smart Control to the STAR Market and withdraw the relevant IPO application documents.

HAN'S Laser, which decided to terminate the spin-off listing of HAN'S Testing in February, also cited significant changes in the current market environment as the reason.In addition to changes in the market environment, the reasons for listed companies to terminate spin-offs include not meeting performance requirements, transfer of control rights by the parent company, and receiving administrative penalties within the deadline, among others.

According to the new regulations on spin-off listings, listed companies must have been profitable for three consecutive years, and after deducting the net profit attributable to the equity interest in the proposed spin-off subsidiary, the cumulative net profit over three years should not be less than 600 million yuan (calculated based on the lower of the net profit before and after deducting non-recurring gains and losses).

Crystal Optoelectronics, which terminated its spin-off last year, mentioned that due to significant changes in the market environment at the time, the performance of its subsidiary, Night Vision Beauty, was expected to be lower than anticipated. Additionally, Ogawa, after deducting the net profit attributable to the equity interest in a company for the last three fiscal years, the cumulative net profit of the listed company fell below 600 million yuan, temporarily not meeting the conditions for a spin-off listing.

Some companies have changed course to the Beijing Stock Exchange.

Since the IPOs on the Shanghai and Shenzhen stock exchanges were temporarily tightened in the second half of last year, the number of listed companies terminating spin-offs has increased significantly. Some companies, after termination, have chosen to list on the Beijing Stock Exchange.

According to data from Tonghuashun, since 2019, a total of 119 A-share listed companies have disclosed plans to spin off 137 subsidiaries for listing on the A-share market. Among them, 27 have successfully gone public, and 40 have terminated the spin-off, with the proportion of terminated spin-offs approaching 30%.

Looking at the segments, the most companies choose to spin off to the Growth Enterprise Market (GEM). Among the 137 companies that have disclosed their intended listing segments, there are 22 on the Shanghai and Shenzhen main boards, 54 on the GEM, 28 on the STAR Market, and 5 on the Beijing Stock Exchange. Among the 40 that have terminated the spin-off, there are 21 companies that intended to list on the GEM.

In terms of industry distribution, among the companies that have chosen to spin off for listing, there are more in the power equipment, electronics, machinery equipment, and pharmaceutical and biological industries, all with more than 10 companies; followed by the computer and transportation industries, which have a higher number of companies.

Since last August, there have been 16 companies that have terminated spin-offs. This includes listed companies such as Wolong Electric Drive and Lizhu Group, which, after terminating the spin-off, have chosen to plan for a spin-off listing on the Beijing Stock Exchange.

For example, on April 28, Wolong Electric Drive announced the termination of the spin-off of its subsidiary, Longneng Electric Power, to the Shenzhen main board. On the same day, it also announced the company's plan to prepare for the listing of its subsidiary on the Beijing Stock Exchange, and the board of directors intends to authorize the company's management to initiate the preliminary preparation work for the listing of Longneng Electric Power.In November last year, Lizhu Group announced the termination of the spin-off of its subsidiary Lizhu Reagent's listing on the Growth Enterprise Market. Following this, they continued to apply for listing on the New Third Board and stated that they would seek listing on the Beijing Stock Exchange at an appropriate time based on future capital market conditions and strategic development needs.