Since last year, 23 new shares have fallen below the issue price on the first day of listing

Will the breaking of new shares become the norm

With the deepening of the registration system reform, the issuance of new shares in the A-share market has increased significantly. At the same time, the breaking of new shares is becoming more and more common. Especially recently, the breaking of new shares has occurred one after another, which has also increased the phenomenon of investors winning the lot and abandoning the purchase.

Will the breaking of new shares become the norm? Experts said that the recent frequent breaking of new shares is related to the implementation of the new regulations on inquiry, which is a necessary stage for the market to mature. In the future, with the continuous optimization of IPO pricing rules, the breaking frequency will tend to be stable, and investors' innovation and institutional issuance pricing will become more rational, which will help to form a standardized and orderly capital market ecology.

High issue pricing is the main reason

Recently, Yahong pharmaceutical landed on the science and innovation board and closed at 17.6 yuan on the first day of listing, down more than 23% from the issue price of 22.98 yuan / share, becoming the first new share to break upon listing this year.

Yahong medicine is not an example. Since last year, new shares have broken frequently. According to the statistics of tonghuashun Ifind, as of the closing on January 10, 23 new shares broke on the first day of A-share listing, of which 17 broke after October last year.

Why do new shares break frequently? Market participants believe that the implementation of the new inquiry regulations and the high pricing of new shares are the important reasons for the break.

In September 2021, the CSRC issued the decision on Amending the special provisions on the issuance and underwriting of initial public offerings on the gem. The Shanghai and Shenzhen stock exchange simultaneously improved the business rules related to the pricing of new shares on the science and innovation board and the gem, and the new inquiry rules were issued.

The new rules of inquiry refer to 'institutions holding together to lower prices', which mainly adjusts the contents in four aspects: first, adjust the elimination proportion of high prices from 'no less than 10%' to 'no more than 3%'; Second, break through the original 'lower of the four values' (the median and average of investors' quotation after high rejection and the median and average of institutional investors' quotation); Third, cancel the requirement that the IPO pricing is linked to the purchase schedule and the number of special announcements on investment risk; Fourth, strengthen the supervision of inquiry and quotation, and clarify the normative requirements, violations and regulatory measures for offline investors to participate in inquiry.

'Before the implementation of the new regulations, restrictions such as' excluding 10% of the high price 'and not exceeding the number of four categories' were set for the pricing of new shares. In order to improve the probability of quotation shortlisting, inquiry institutions generally pay more attention to shortlisting than research and' hold together to lower the price '.' Dong Dengxin, director of the Institute of Finance and securities of Wuhan University of science and technology, said.

The new regulations optimized the pricing rules, and the overall pricing center of new shares moved upward, which objectively promoted the high pricing of some new shares, causing an increase in the first day break. According to the statistics of tonghuashun Ifind, since the implementation of the new inquiry regulations, the issuance of new shares at high prices has become more common. Since October 2021, 26 new shares have been issued at a price of more than 50 yuan, accounting for nearly one fifth of the proportion of new shares issued in the current period; From the beginning of 2021 to the end of September, new shares with an issue price of more than 50 yuan accounted for only 11%. From the broken 23 new shares, most of them are highly valued stocks.

'After the implementation of the new regulations on inquiry, the problem of institutions holding down the issue price has been improved, the issue price of new shares has become more reasonable, and listed companies can raise more funds through IPO to maximize their interests.' Chen Li, chief economist of Chuancai securities and director of the Research Institute, said that, however, some investors have not yet adapted to the new regulations. In order to win the lottery successfully, they tend to report higher prices or even issue at a premium, which makes it easy to break after the listing of new shares.

Disillusionment of the myth of 'fighting new and invincible'

Will the breaking of new shares become the norm? Market judgment is different.

Chen Li believes that with the continuous adaptation of the market to the new rules of inquiry, investors make reasonable quotations according to the company's value, the pricing of new shares falls back to the normal range, and the excessive pricing of new shares is expected to be alleviated.

'In the context of the continuous promotion of the reform of the registration system, the breaking of new shares will not be an accidental phenomenon, but will appear from time to time.' Tian Lihui, President of the Institute of financial development of Nankai University, said that in the future, with the improvement of market pricing ability, the game of new shares will return to a new balance, and the breaking frequency of new shares may be reduced. Whether new shares are broken or not is jointly determined by factors such as the state of bull and bear in the market and the quality of individual stock enterprises.

In fact, the breaking of new shares is very common in the global market. For example, the breaking rate of new shares on the first day of listing in the United States is more than 20%, much higher than the current A-share market. 'Breaking is not only an important manifestation of the trend of issuing pricing towards marketization, but also a necessary stage for the market to mature.' Dong Dengxin said that allowing a certain proportion of new share issuance to break will not only make offline inquiry institutions more cautious and rational, but also make the pricing of new shares more balanced. 'The market that will break is the normal market' will become the consensus of more people.

It is worth mentioning that after the myth of 'unbeaten new shares' was broken, investors' enthusiasm for playing new shares has cooled down, and many stocks have a high abandonment rate.

For example, Baiji Shenzhou's previously published listing and issuance results show that its online investors give up the subscription of 1032500 shares. If calculated according to the number of shares issued by the company of 115 million shares, the amount of abandonment reaches 199 million yuan; The listing and issuance results of Hemai shares also showed that its online investors gave up the subscription of 65138700 shares, with a subscription amount of 363 million yuan.

'Investors have inertia in the expectation that the new shares will rise significantly after listing, and have not actively adjusted their expectations and investment strategies. At the same time, in the face of the reality of the breaking of many new shares, investors choose to abandon the purchase because they are worried about the breaking of new shares.' Chen Li analysis.

Innovation is no longer a risk-free 'lying win', and some 'new speculators' gradually withdraw, which has curbed the irrational behavior of the market to a certain extent and promoted the healthy development of the market. 'And in the future, with the establishment of a disciplinary mechanism for purchase dishonesty, a high proportion of purchase abandonment will not be the norm.' Tian Lihui said.

Tian Lihui said that the era of 'mindless innovation' will eventually become a thing of the past, and investors need to change their thinking when investing in new shares. Under the background of the comprehensive promotion of the reform of the registration system, the scarcity of listed companies will inevitably be reduced, coupled with the improvement of the pricing level of market-oriented issuance, the enterprise valuation will eventually return to the actual value. Investors should keep rational, make scientific analysis and judgment, and focus on enterprise fundamentals.