China halts scores of IPO plans amid probe into underwriter, law firm

Chinese bourses have halted processing at least 60 initial public offering (IPO) applications as regulators investigate intermediaries in the deals, including Deutsche Bank AG’s Chinese securities venture.

Exchange disclosures on Wednesday showed 12 IPO plans in Shanghai’s tech-heavy STAR Market and 48 in Shenzhen’s start-up market ChiNext were suspended.

Each had hired one or more of three companies being investigated by securities regulators – Zhong De Securities Co, accountancy firm SineWing and law firm King&Wood Mallesons – the exchange filings said. Zhong De is a joint venture between Shanxi Securities and Deutsche Bank.

All three companies advised Leshi Internet Information and Technology, which the China Securities Regulatory Commission (CSRC) last March said conducted accounting fraud between 2007 and 2016.

China has vowed to show “zero tolerance” towards securities and accounting fraud, seeking to attract more money into capital markets to fund innovation and economic growth.

STAR Market IPO candidates affected included Beijing Tongmei Xtal Technology Co, Nexchip Semiconductor Corp and State Grid Intelligence Technology Co.

Impacted ChiNext listing hopefuls included Longkou Union Chemical Co, Zhejiang Sling Automobile Bearing Co and drugmaker Tianjin Tongrentang Group Co.

King&Wood Mallesons and Zhong De said they had no immediate comment. SineWing and Deutsche Bank could not immediately be reached for comment.

Shanxi Securities said in an exchange filing on Jan. 18 that Zhong De would fully cooperate with the CSRC’s investigation into suspected law violations when it underwrote sales for Leshi in 2016.

It was not immediately clear if IPOs targeting the main boards in Shanghai and Shenzhen, as well as the Beijing Stock Exchange were also affected.

Chinese bourses had halted processing batches of IPO applications previously as regulators investigated intermediaries.

Such suspensions delay, but don’t necessarily kill companies’ listing plans.

On Friday, the chipmaking unit of Chinese automaker BYD Co Ltd got the nod from regulators to list on ChiNext following a lengthy application process.

BYD Semiconductor applied for an IPO in May 2021 but was forced to halt plans in August as a firm advising the share sale faced a regulatory probe.

Authors: Samuel Shen, Josh Horwitz, Reuters

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