On Innovative Paths Of Returning To Domestic Stock Markets For China Concept Stock Companies

During recent years,domestic capital markets have developed rapidly,relevant systems have gradually improved and domestic markets have released favorable signals to overseas China concept companies.The general direction of reforming the existing system and supporting the development of the new economy and the fast-listing of technology unicorn companies has become very clear.In 2015,relevant policies encourages overseas high-quality listed companies and special equity structure enterprises to return to the domestic market.Since 2018,the regulatory authorities have consistently expressed that supporting the development of capital markets means to support the development of the new economy.The CSRC has opened up IPO fast-tracks for the four-industry “unicorn” of the new economy.The high valuation of science and technology enterprises in the domestic markets has attracted China concept stock companies to put the privatization and return arrangement on the agenda.Since the IPO listing requires a longer “queuing” and reviewing period and the requirements of which are more strict,the “backdoor listing” has become more preferred method for many China concept stocks.In order to effectively control the quantity and quality of returning enterprises,in 2016,the China Securities Regulatory Commission(CSRC)proposed a policy of suspending the return of China concept stocks by IPO or backdoor listing.The traditional path blocked,so many companies created innovative returning methods,such as Home Inn's A To A mode,Sou Fun's equity carve-outs mode and CDR mode provided by new policies.As a representative new economic industry “unicorn” enterprise,the return of Wu Xi App Tech has become the first example of IPO listing in A-share market.The more distinctive feature is its innovative “one divided into three” path of privatization and return.Therefore,this article takes Wu Xi App Tech's innovative privatizing and returning path as the object of this case study.This paper bases on the theories of returning motivation of China concept stock companies proposed in the existing literature,including under valuation theory,market timing theory and cost-benefit theory,and analyzes the returning motivations of Wu Xi App Tech.And the conclusion is that the motivations are to optimize business structure and strategic layout,to defend acquisition,to sort out equity structure,to reduce supervision and listing maintenance costs,to raise long-term underestimation value of the company and the price effect brought by high valuation of A-share market,favorable pharmaceutical industry policies and IPO fast-tracks.This paper studies how case enterprises conduct capital operations,what changes has happened in equity structure,and how does the returning performance,to reveal its returning motivations,why management choose and design this way of returning,analyze its key innovative design,namely namely assests stripping and listed in New OTC market before privatization,one divided into three method,incompletely dismantlement of VIE structure and reduction of IPO fundraising,and its unique privatization financing arrangements,and sum up its successful experience.Based on the successful experience of the case company,this article puts forward suggestions on how to rationally choose the returning path for the China concept stock companies.It is recommended for enterprises which intend to go back to domestic market that to achieve leveraged financing progressively,to design returning approach scientifically and suitably,and pay close attention to policy requirements.The shortcoming of this approach is to ignore the risks of the high valuation for business operations,the hidden dangers of not completely dismantling the VIE structure and the lack of response to environmental compliance risks.For the risks and problems existing in the innovative plan,combined with the realistic conditions,this article puts forward suggestions for Wu Xi App Tech to further improve the returning path.Finally,it proposes policy recommendations to the regulators: to encourage intermediaries to participate,to implement diversified management and classified supervision.