Li Hualin / economic daily

Recently, a series of new share breaks have affected the nerves of investors. The breaking of new shares is the embodiment that the market-oriented value discovery function gradually plays a role. However, there are also problems that need to be paid attention to and reflected behind the repeated breaking of new shares. In the future, with the comprehensive promotion of the registration system, the breaking of new shares may become the norm. Investors need to change the thinking pattern of “blindfolded lying and winning”, and pay more attention to the fundamentals of enterprises in the selection of new shares.

Recently, a series of new share breaks have affected the nerves of investors. According to statistics, since this year, more than half of the new shares have broken, and individual shares that fell below 20% and 30% of the issue price on the first day of listing have appeared frequently. Investors have repeatedly called “winning the lot is like being shot”, and individual new shares have become “hot potato”, resulting in the phenomenon that up to one-third of the winners abandon the purchase.

Why do IPO breaks occur frequently? There are two main reasons.

First, the impact of market conditions. This year, covid-19 market adjustment has increased, geopolitical conflicts, Fed rate hikes and new crowns pneumonia epidemic spread, and so on. The market sentiment is slightly depressed, and the performance of new shares has also been affected.

Second, it is related to the “three high” issuance of new shares. A number of new shares were issued at high prices, high price earnings ratio and high fund-raising amount, and valuation return was imminent after listing. Among them, many stocks issued at high prices, but the enterprise performance is at a loss. In the face of issuing pricing divorced from the fundamentals, investors chose to “vote with their feet”.

The breaking of new shares is the embodiment of the gradual function of market-oriented value discovery. Over the past period of time, the A-share market has frequently seen “three low” new shares with low issuance price, low P / E ratio and low fund-raising amount, and the phenomena of “centralized quotation” and “holding together to lower the price” of institutions have been prominent. In order to make the IPO pricing more reasonable, the implementation of the new inquiry regulations in September last year strengthened the market-oriented pricing of new shares, strengthened the quotation game, made it more difficult and reduced the space for intermediate arbitrage, broke the myth of “unbeaten new shares” and promoted the return of new shares to rationality. In other words, the breaking of a certain proportion of new shares is the only way for a shares to move towards a mature market.

However, there have been frequent breaking of new shares in recent times, and there are also problems that need to be paid attention to and reflected on. After all, the break of new shares, especially the sharp break, has brought real losses to investors. The frequent breaking and large-scale abandonment of purchases caused by the “three highs” issuance also undermine the function of the capital market to provide direct financing for enterprises and serve the real economy.

I’m afraid there’s a question mark about the pricing power of some inquiry institutions. The frequent issuance of “three highs” of new shares is closely related to the high prices quoted by some inquiry institutions. In order to obtain a higher proportion of underwriting and recommendation fees, in the process of corporate IPO, some inquiry institutions tend to set high prices, objectively promoting the rising price of new shares and increasing the probability of breaking new shares.

The registration system emphasizes the marketization of issuance pricing. How to set the price of new shares more reasonably tests the research ability and professional ability of inquiry institutions, and it is also an important embodiment of the competitiveness of institutions in the future. Inquiry institutions need to change the previous behavior path of emphasizing game and neglecting research, effectively improve their own research and investment ability, balance the interest demands of enterprises and investors, make an objective and rational quotation in combination with the company’s fundamentals, improve the marketability of stocks and enhance their own market influence.

After the implementation of the new regulations on inquiry, the “three highs” are issued frequently, which reflects that there are still some shortcomings in the inquiry mechanism, which needs to be further improved. For example, it can be considered to moderately increase the high price exclusion ratio from the current “no more than 3% and no less than 1%, so as to promote a more balanced inquiry game and set a more appropriate price for new shares.

In addition, listed companies also need to be vigilant against high issuance pricing that is divorced from fundamentals. The occurrence of large-scale breaking and large-scale abandonment of purchases is undoubtedly harmful to the reputation of listed companies, and some companies even lack of fund-raising. Listed companies should not blindly pursue high premium issuance, but should be down-to-earth to seek listing and wholeheartedly seek development. Only by effectively improving its own value, the growth of enterprise market value will be natural and the internal value can be more reasonably reflected.

In any case, in the future, with the comprehensive promotion of the registration system, the breaking of new shares may become the norm. The myth of “new shares will not fail” is a thing of the past, and “innovation” has also become a kind of venture capital. Investors need to change the mindset of “lying blindfolded and winning”. In the selection of new shares, they need to shift from “playing every new game” to selecting individual stocks, and pay more attention to the fundamentals of enterprises.

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