Inquiry Reply: Overdue Sipai Precision Listing "Passively" Terminated

How could an IPO be terminated due to the delay in answering inquiries?

Failing to reply to the exchange's inquiry on time, Sipai's listing on GEM was "passively" terminated. This is also the gem pilot registration system, the first reason for the delay in answering inquiries, and was terminated listing cases.

On August 2, the Shenzhen Stock Exchange announced that Sipai precision, which plans to be listed on the gem, did not reply to the Shenzhen Stock Exchange's audit inquiry within the specified time limit, and the total time for reply to the audit inquiry has exceeded three months. According to the relevant provisions of Article 67 of the Shenzhen Stock Exchange's rules on the examination and approval of the issuance and listing of shares on the growth enterprise market of Shenzhen Stock Exchange, the Shenzhen Stock Exchange has decided to terminate the examination of Sipai precision's IPO and listing on the gem.

The slow response of the first two rounds of inquiry resulted in insufficient "balance"

According to the information released on the official website of Shenzhen Stock Exchange, the listing road of Sipai precision is tortuous, and the company only used for declaration has issued the prospectus five times.

According to public information, Sipai precision is a supplier of precision injection molds and injection parts. As early as July 31, 2020, the company has applied to Shenzhen stock exchange for listing on the gem and has been accepted. The sponsor is Huatai United Securities.

On August 30, 2020, Sipai precision experienced the first round of inquiry in the stock exchange one month after its declaration for listing. During this period, the company updated the financial statements in the prospectus, and it was not until January 15, 2021 that Sipei precision disclosed its reply letter to the first round of inquiry of Shenzhen stock exchange.

According to the current regulations, the examination cycle of gem is "3 + 3", that is, the total time of Shenzhen Stock Exchange audit and CSRC registration shall not exceed 3 months; The total time for the issuers, their sponsors and securities service institutions to reply to inquiries shall not exceed 3 months. However, in case of suspension of audit, application for instructions from competent authorities, handling of matters after the meeting, on-site inspection, special verification required, and application documents supplemented and modified by the issuer, etc., shall not be included in the time limit specified in "3 + 3".

"Most of the time to reply to inquiries is not enough, we will take the time to stop the audit of the updated financial report." There are senior investment banks in Beijing said.

The 21st century economic report reporter is the statistical issue. It took 50 days before and after the first round of inquiry. During this period, the company suspended the audit for nearly three months due to the supplement of financial reports, approaching the red line stipulated by the exchange.

In the second round of inquiry of the exchange, Sipai precision also moved slowly. On January 29, the exchange gave the audit inquiry letter, and on March 30, the company completed the listing of the reply letter, which also took more than 50 days. In fact, at this time, the "balance" used by sipper precision to reply to the inquiry of the exchange is insufficient.

"There is still some operation space in the middle. For example, I submitted it, but you haven't confirmed it. Neither side is time." Wang Jiyue, a senior investment banker, said. At present, the response time of the companies to be listed on the science and technology innovation board and the growth enterprise market is three months. However, before the market response of the science and technology innovation board is published on the Internet, the communication process time between the enterprise and the supervision is also included in the scope of the audit response, while the gem is not included in the total reply time of three months.

However, siper precision still spent too much time in the first two rounds of inquiry, resulting in the company's follow-up inquiries in a hurry, and still failed to meet the cumulative three-month red line for answering inquiries. In this regard, the Shenzhen Stock Exchange said that as of July 17, 2021, Sipai precision did not reply to the audit inquiry of the exchange within the specified time limit, and the total response time of audit inquiry has exceeded three months.

Reply overtime or cause concern of the exchange

"It's really rare to miss the reply time. In my impression, the last time this happened was in the early stage of the science and technology innovation board." A person in charge of investment banking business of small and medium-sized securities companies in China believes that Sipei precision spent too much time in the first two rounds of inquiry, which made it too late to reply to the latest round of inquiry. "I think there should be no subjective delay. Maybe the company and the sponsor are not fully prepared, and the inquiry is too difficult to answer and takes too much time."

However, the person in charge of the investment bank also said that the exchange may also pay attention to the situation of overtime response to inquiries, "failure to reply to inquiries within the specified time is no different from withdrawing materials and voluntarily terminating listing."

It is worth mentioning that among the latest batch of 19 IPO companies selected by the securities industry association to participate in the on-site inspection, 3 have voluntarily withdrawn their listing materials. Prior to that, the CSRC also specially revised the guidance on urging securities companies to return to their original positions and fulfill their responsibilities in investment banking business under the registration system, saying that it would further expand the scope of on-site inspection and supervision, adhere to the principle of "declaration means responsibility", and the CSRC and trading venues will organize verification of projects withdrawn after receiving on-site inspection or supervision notice, We will resolutely put an end to "breaking through customs with illness.".

"I feel that the investment bank will not be punished just by the overtime response." However, due to the overtime response, the exchange may pay attention to other hidden problems of the enterprise, and then investigate whether the sponsor institutions are diligent and responsible.

Prior to that, Sipai precision had been inquired by the exchange due to non-standard financial internal control, high customer concentration, and the existence of related party transactions.

Specifically, the company's financial internal control issues have been mentioned in the two inquiries of the exchange, and the Shenzhen Stock Exchange believes that Sipai precision did not fully explain the effective measures to ensure the standard of financial internal control in the first round of inquiry.

In addition, from 2018 to 2020, the sales revenue of the top five customers of Sipai precision accounted for 77.15%, 80.82% and 75.93% of the current main business income respectively, with a high customer concentration. Among them, Konica Minolta, the largest customer of the company, accounted for 40.80%, 43.41% and 49.52% of the sales in each period. The exchange also pointed out that the gross profit margin of sipper precision on Konica Minolta sales was significantly lower than that of other customers, and required the company's collective pricing mechanism to explain whether there is a risk of further decline in the gross margin in the future.