- Media reports to the contrary, IPOs look set to resume in China after a two-month hiatus.
- China's IPO process undergoing a 180-degree shift, letting markets, not regulators, decide who will IPO, when and at what price.
- With bumps along the way, China's capital markets are headed in the right direction.
Spot the difference between the headline and the factual content of the article? One is designed to capture your attention, if not ruin your day. The other conveys less alarmist, less hyperventilated facts.
Something similar is at work in this article published by Reuters yesterday on China's IPO market, the recent delays and the prospect for resumption later this year. Click here to read the Reuters article.
Reading just the headline, "China IPO promised land turns to desert as regulator review stokes confusion", and you would likely conclude China's IPO market had turned to a barren wasteland, where no Chinese company would anytime soon be able to tap the public markets for capital. One certainly would not expect, 24 hours earlier, another respected business publication, in this case the Wall Street Journal, to publish an article that suggests the IPO process in China is about to boom.
Yet, that's what happened. Same weekend. Same China. Wildly divergent realities. Here's the Journal article.
So, what's going on here? Well, first off, the Wall Street Journal article is, both headline and body, a lot closer to the truth, at least as far as I'm able to judge. IPOs in China, after a two-month hiatus, are about to start up again. The country's securities regulator, the CSRC, is introducing a new market-based process of IPO approval.
It's a 180-degree change over the IPO system in China prevailing until the start of this year. Big change, and some big bumps along the road. But, overall, China is heading clearly in the direction where IPOs -- which companies, when and at what listing price -- will be decided by the market, by investor demand, not regulatory fiat.
The Reuters story, on the other hand, tries to mount a case that things have broken down rather seriously. The text of the article, to be fair, doesn't entirely reflect the content of that headline. This sometimes happens, based on my experience back some twenty years ago working as a journalist. But, the gap here between headline and story, as well as between headline and fact, is larger than one might like to see.
My guess is the Reuters reporters started out with a plan to write about the breakdown in China's IPO market, gathered up some quotes, as well as a bit of evidence in the form of 24 companies (out of a total of 700) dropping off the IPO waiting list. They called me nine days earlier asking for a comment, probably knowing I don't see things to be quite so dark and hopeless. That quote appears at the very bottom of the article. Here's the full text of what I told them.
The Reuters article was written, edited and was waiting to be published when, perhaps inconveniently for Reuters, the CSRC unexpectedly announced late Friday that 28 Chinese companies are well along in their IPO plans and should close their fund-raising soon. That's the story the Journal published.
Reuters went ahead and published its story. It didn't bother to change that gloomy headline, and didn't mention this news about a large batch of IPOs about to move forward. The "desert" Reuters describes apparently can sustain IPO life, after all.