The Strategist

China's Star exchange cancels record number of IT industry IPOs in 2023

10/31/2023 - 06:12

According to the Financial Times, a record number of Chinese businesses, many of who are IT industry participants, abandoned their ambitions to list their shares on the Shanghai platform Star in 2023.
The exchange, which is governed by Chinese officials, has upped the bar for new offerings this year significantly, according to the publication’s sources. Companies must prepare hundreds-page studies outlining the advantages of their technologies in addition to being profitable in order for authorities to provide the "green light" for initial public offerings (IPOs).

Although the exchange was initially established to give high-risk IT companies access to finance, the FT adds that many startups now find it impossible to get listed on Star due to the new regulations.

Publicly available data shows that in 2023, 126 companies—more than in the four years prior combined—canceled or postponed their IPOs on Star.

Authorities anticipate that enforcing stricter rules for Star access will facilitate the allocation of funds to the best-performing businesses. However, experts think that by denying potentially viable firms access to capital, this strategy will stifle innovation.