| China’s capital market has become increasingly robust with the continuous development of the socialist market economy and has gradually become an integral part of the capital diversification of China’s market economy.SMEs prefer to raise funds on the more lenient GEM to meet their capital needs than on the Main Board and SME market.12 June 2020 saw the commencement of the GEM reform and pilot registration system,which further lowered the barriers to entry for enterprises,and SMEs have become increasingly enthusiastic about the GEM.By the end of 2022,a total of 1,043 enterprises in China had submitted listing applications to GEM,but there were still 271 failed IPOs,with an overall pass rate of approximately 74%.How to successfully pass the IPO audit has become the focus of attention for the companies to be listed.The case company in this paper,Company H had failed to hit the Shenzhen GEM IPO in September 2020,and the reasons for its failure will be explored in the rest of this paper.In this study,this paper first uses the literature review method to summarize the domestic and international literature on IPO-related research,as well as the concepts of GEM and the registration system,to provide theoretical support for the writing of this paper.Secondly,an overview of the theoretical aspects of GEM IPO is combined with an explanation of the conditions for listing on GEM and the review process.Then,starting from the basic information of development history,financial status,product system and sales model,the process and results of GEM listing of Company H are briefly reviewed,and the IPO rejections since the GEM registration system reform are collated to refine the audit focus.Afterwards,the case is analyzed based on four perspectives: financial data,sales model,operational norms,and choice of listing institution,and the main reasons for the failure of Company H’s IPO are summarized: insufficient sustained profitability,business model in need of innovation,over-concentration of equity,irregular operation,and poor choice of listing institution,among other five aspects.Finally,five recommendations are made to address the reasons for the failure of Company H’s IPO.It is hoped that the company can improve the success rate of its IPO by increasing its R&D efforts to enhance profitability;innovating its business model to improve the quality of its profits;optimising its shareholding structure to establish checks and balances;regulating its operation and publicity to avoid stepping on the legal red line;and choosing its listing institution carefully and optimising its pre-meeting counselling.This study hopes to improve the quality of GEM-listed companies at source and provide inspiration and reference to SMEs proposing to list on GEM. |
