The once-popular "A splits A" phenomenon is cooling down.
On September 20th, Zoomlion Heavy Industry Science & Technology Co., Ltd. announced the termination of the restructuring and listing of its subsidiary. From the initiation of the spin-off work to the official announcement of termination, it took more than a year. Zoomlion stated: "In view of the significant changes in the market environment since the planning of this spin-off, in order to effectively protect the interests of the company and the majority of investors, after full consideration and prudent demonstration with relevant parties, the company decided to terminate the spin-off related matters."
A week ago, Shenzhen Huaqiang's "A splits A" plan also announced its failure. According to an incomplete statistics by reporters from Beijing News Shell Finance, more than 20 companies have terminated their spin-off listing plans this year, including Zoomlion, Dongfang Jinggong, JingSheng Electromechanical, Baosteel Shares, Hisense Visual, etc., involving industries such as non-ferrous metals, petroleum and petrochemicals, automotive, agriculture, forestry, animal husbandry, fishery, building materials, machinery equipment, steel, real estate, power equipment, etc.
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For the reasons for terminating the spin-off listing plans, many companies attribute it to changes in the market environment.
Jiang Han, a senior researcher at Pangu Think Tank, believes that the cooling of "A splits A" reflects the strengthening of market supervision and the improvement of market standardization, which helps to prevent enterprises from cashing out capital or evading supervision through spin-off listings; secondly, this phenomenon helps to optimize the allocation of market resources, avoiding resource waste and market chaos caused by excessive spin-offs; finally, it reminds enterprises and investors to act cautiously when engaging in capital operations, fully considering the changes in the market environment and regulatory policies, reducing market risks.
After the cooling of "A splits A", some enterprises have begun to explore the new path of "A splits H". On September 13th, Goertek announced a shift to "A splits H". As early as the beginning of this year, iFLYTEK also announced the preliminary plan to spin off its subsidiary iFLYTEK Medical Technology Co., Ltd. to the Hong Kong Stock Exchange for listing.
"A splits A" cooling
More than 20 companies have terminated spin-off plans this year
Data from East Money Choice shows that as of September 24th, this year, 21 A-share listed companies have issued announcements on terminating the listing of their subsidiaries, from industries such as non-ferrous metals, petroleum and petrochemicals, automotive, agriculture, forestry, animal husbandry, fishery, building materials, machinery equipment, steel, real estate, power equipment, etc.
On September 13th this year, Shenzhen Huaqiang issued an announcement on the expiration and invalidity of the registration approval for the initial public offering of shares by its subsidiary Shenzhen Huaqiang Electronic Network Group Co., Ltd., which means that Shenzhen Huaqiang's "A splits A" plan has failed.Partial Termination of "A Spins Off A" Company Situations, Data from Eastmoney Choice.
On September 20th, Zoomlion released an announcement regarding the termination of the spin-off and reorganization listing of its subsidiary.
Beijing News Shell Financial reporters combed through and found that companies such as Baosteel Shares, Hengli Petrochemical, Jingcheng Electromechanical, Zhengzhou Coal Machinery, SAIC Group, Weichai Power, Jiangxi Copper, and Han's Laser cited the impact of changes in the market environment as reasons for explaining the termination of this spin-off listing.
Regarding the reasons for terminating the spin-off, Jiang Han, a senior researcher at Pangu Think Tank, analyzed and pointed out that there are external reasons first. On one hand, the current macroeconomic environment, industry dynamics, and the overall condition of the capital market will affect the company's spin-off listing plans; on the other hand, the tightening of regulatory policies, especially the "Several Opinions on Strengthening Regulation, Preventing Risks, and Promoting High-Quality Development of the Capital Market" issued by the State Council, clearly proposes stricter regulation of spin-off listings, increasing the difficulty and uncertainty of company spin-off listings, and will also have a certain impact. However, internal factors cannot be ruled out. Some companies have been forced to terminate their spin-off listing plans due to performance not meeting the requirements for spin-off listing, transfer of control rights of the parent company, or receiving administrative penalties within the specified time limit.
Pan Helin, a member of the Expert Committee of the Ministry of Industry and Information Technology's Information and Communication Economy, told Beijing News Shell Financial reporters: "One of the purposes of spin-off is to obtain a higher valuation through the listing of subsidiaries, and now the market is not good, so the increase in valuation is limited. In the future, when the market turns good, spin-off listings will become active again." He also pointed out, "The significance of spin-off listing itself is not great. Even without spin-off listing, internal business separation can be achieved through certain equity control arrangements, so the cooling phenomenon indicates that current listed companies are more pragmatic."
The cooling phenomenon of "A Spins Off A" means a return to rationality for the market. Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, believes that this helps to reduce speculative behavior, improve resource allocation efficiency, and promote the long-term stable development of the capital market.
The spin-off of listed companies is an important means for the capital market to optimize resource allocation, improve corporate competitiveness, promote economic structure upgrading, and stimulate market vitality. It is beneficial for companies to optimize their business structure, expand financing channels, improve incentive mechanisms, and promote diversified development, which has a positive significance for the high-quality development of enterprises and the economy. However, what impact will the termination of spin-off listing have on the company?
Many companies have stated that the termination of this spin-off listing will not have a substantial impact on the company, will not have a significant adverse impact on the company's existing production and operation activities and financial condition, and will not affect the implementation of the company's future strategic planning.
Jiang Han believes: "The termination of the spin-off listing plan will have a multifaceted impact on the company. First, it may have a certain impact on the company's strategic planning, as spin-off listing is often one of the important means for the company to achieve diversified operations and optimize resource allocation. Second, the termination of the spin-off listing plan may cause the company to miss an opportunity to raise funds through the capital market, thereby affecting the company's financial condition and investment plans. In addition, it may also have a certain negative impact on the company's brand image and market confidence, as the termination of spin-off listing may be seen as a signal that the company has problems or uncertainties in capital operations."
Fu Jian, director of Henan Ze Jin Law Firm, believes: "The termination of the spin-off listing plan may trigger market concerns about the company's prospects, leading to short-term fluctuations in the company's stock price, and at the same time leading to adjustments in the company's strategic planning and the reconfiguration of resources."After the failure of "A splits A," Goertek turns to "A splits H."
Jianghan Analysis points out that once the spin-off listing is successful, the company can broaden its financing channels, reduce financing costs; improve the operational efficiency and profitability of business segments; enhance the company's market competitiveness and brand influence; and increase the company's market valuation and shareholder value.
Precisely for this reason, after the failure of "A splits A," Goertek turns to "A splits H."
Goertek released an indicative announcement about planning the spin-off listing of its holding subsidiary Goertek Microelectronics Co., Ltd. (hereinafter referred to as "Goertek Microelectronics") in November 2020. At that time, the senior management of Goertek believed that this move would help the company focus on core businesses and enhance the profitability and comprehensive competitiveness of its holding subsidiary.
After more than three years of promotion, on May 23, 2024, Goertek still abandoned the plan to spin off Goertek Microelectronics to the ChiNext board. At the same time, Goertek promised not to plan major asset restructuring matters (including spin-off listings) within one month after the announcement of the termination of this spin-off listing.
After the failure of "A splits A," Goertek turned to "A splits H." On September 13, 2024, the board of directors of Goertek reviewed and passed the resolution on the "Goertek Co., Ltd.'s预案 for the spin-off of its subsidiary Goertek Microelectronics Co., Ltd. to the main board of the Hong Kong Stock Exchange" and other resolutions related to this spin-off.
Coincidentally, iFLYTEK announced the预案 for the spin-off of its subsidiary iFLYTEK Medical Technology Co., Ltd. to the Hong Kong Stock Exchange in January this year. iFLYTEK believes that this spin-off will provide iFLYTEK Medical with an independent listing platform, which can directly obtain equity or debt financing from the Hong Kong capital market to meet the funding needs for existing and future business expansion, and emphasizes the importance of highlighting the main business of the listed company and iFLYTEK Medical, enhancing independence, and long-term development.
Some industry insiders say that A-share companies choose to list on the Hong Kong stock market through "A splits H," which can not only attract more international investors, enhance overall market value and brand influence, but also may bring higher market valuations to the company.
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