Why should unicorn enterprises return to A shares?

In recent years, watching the three major American stock indexes hit record highs, the sour taste in the hearts of domestic investors will not be mentioned. However, with the introduction of the China Securities Regulatory Commission, domestic unicorn companies lost in the US stock market can return to A-shares with the help of the spring breeze of "CDR", which is undoubtedly an additional speculation theme in this year's A-share market.

Additional funds exist in the present. When you randomly ask investors in the domestic stock market whether they want to buy the shares of domestic unicorn companies listed in the US stock market, the answer is absolutely surprisingly consistent: buy buy does.

It is no wonder that in recent years, the US stock market thousands of miles away is full of bullishness, and the three major stock indexes representing the investment vane of the US stock market have also hit record highs, which makes the stock market investors who stare at the stagnant water in China feel uncomfortable every day.

Interestingly, with the help of the upward trend of the US stock market, the share prices of Chinese stocks listed in the US are naturally rising, especially those of Chinese stocks companies such as Alibaba, Baidu and JD.COM that absolutely meet the unicorn standard, which not only makes domestic investors who hold these Chinese stocks happy, but also makes them sour. Many investors can't help shouting: Why can't investors in China share the dividend of China Stock Exchange?

"Additional financing" may have played a role in the grief that domestic investors can't participate in the investment in China Stock Exchange, or it may be that the regulatory authorities re-examined the intrinsic investment value of China Stock Exchange according to the changes in the domestic capital market. Just this spring, the CSRC finally issued "Several Opinions on Launching the Pilot Project of Domestic Stock Issuance or Depositary Receipts of Innovative Enterprises", that is to say, the legendary CDR finally landed.

What kind of goods is CDR? Why did it land at this time? Is it happy or sad for the A-share market? A series of problems beset investors. So, let's unveil the mystery of CDR and see what CDR can bring to China's capital market.

Previous life of CDR

The full name of the CDR for additional financing is "China Depository".

Receipt). We know that the listing mode of China Stock Exchange listed in the United States is generally like this: the main business entity is in China and the listed entity is overseas. Overseas listed entities control domestic business entities through agreements (VIE framework) and list overseas through VIE framework.

As far as China Stock Exchange is concerned, in order to return to A shares, it is necessary to recover the shares circulating outside through privatization, dismantle the VIE structure, redeem the shares of overseas institutional investors, and then conduct domestic IPO review and listing. If you do this, the time period will be longer and the intermediate operation will be more tortuous. The emergence of CDR is equivalent to providing a converter for unicorn stocks that want to return to the domestic A-share market, saving a lot of trouble.

For example, Baidu has been listed in the US stock market for many years, and now Baidu is going back to China to raise funds to participate in the A-share market. We can discuss with Bank of China that 10000 shares of Baidu US stocks will be entrusted to Bank of China, and then Bank of China will use these entrusted shares to issue 10000 shares of CDRs, so that domestic investors can buy and sell such CDRs and participate in investment in Baidu.

After reading the above example, for investors who don't know much about cdr, extra finance may have many questions. Among them, the most concerned topic is the advantages and disadvantages of purchasing cdr. Here, the author will have a good talk with you.

If you buy stocks in the A-share market, you are a shareholder. If you buy enough shares, you will have the right to speak and replace those who are dissatisfied with the poor management of the company. However, if you buy cdr, it will be different. CDR holders can enjoy dividends of listed companies, but they do not participate in voting (voting rights are controlled by custodian banks), that is, they do not participate in decision-making and only enjoy investment income (including losses, of course). Simply put, CDR proves that you have the right to buy such overseas stocks (essentially similar to warrants).

More importantly, CDR is not a stock after all, and the transaction scale and market capacity are not as large as the stock market. Its price fluctuation is much greater than that of individual stocks, and due to the time difference (the trading time between China and the United States is about 9 hours), its trading is not coherent, which will probably take some time for investors who are used to continuous trading in the domestic stock market.

Since "extra financing" is so troublesome to buy CDRs, why do domestic regulators use CDRs instead of listing these unicorn companies directly when attracting overseas unicorn companies to return to the A-share market? The reason is nothing more than worry and trouble.

When it comes to peace of mind, the requirements for listing and delisting in the US stock market are relatively simple, easy to list and easy to delist, which is completely different from the domestic A-share market. Why do many domestic unicorn companies choose to go public in the United States all the way because they can't meet the conditions of A-share IPO? For example, the A-share market has strict requirements on the ownership structure and profitability of companies planning to go public in IPO. Many unicorn companies find it difficult to meet their requirements, so they have to go public in the United States. The unicorn company that has been listed in the United States, if it returns to the A-share market by issuing CDR, the procedure is relatively simple, and it can also achieve the purpose of raising funds from the A-share market.

Speaking of saving trouble. In the past, when China Stock Exchange returned to A-shares, it had to delist from the market after the privatization of US stocks, and then re-list in A-shares, just like the previous 360 return. If you return in this way, the time period will be very long. It took 360 about 20 months to return to the A-share market. However, if the company returns through CDR, there is no need to dismantle the VIE (Variable Interest Entity, an agreement mode that separates overseas listing from domestic operation) structure and change the main structure of listed companies, thus saving a lot of time and troublesome procedures and realizing rapid listing.

Investment prospect after introducing CDR

The impact of additional finance on domestic stock market investment after the introduction of CDR is also a topic of great concern to investors. After all, the capital markets in China and the United States are very different, which is not only reflected in the differences in securities laws and trading systems, but also in the time difference. At the level, it will also involve the adjustment of relevant legal provisions, and the regulatory authorities of the two countries also need to have an adaptation process.

Obviously, the first advantage of domestic stock market after the introduction of CDR is that RMB can buy US stocks without going abroad. In recent years, the surge in the US stock market has tickled many domestic investors. However, due to the lack of channels to invest in US stocks and the limitation of the annual index of RMB exchange for US dollars, many local tyrants have to go to the United States to change their identities and speculate in US stocks, especially the Chinese stocks in US stocks. No wonder these local tyrants don't know much about American companies, so they can only buy China stocks, which is relatively reliable, but the cost of switching identities back and forth is too high.

The second benefit of the domestic stock market after the introduction of CDR by additional finance is to effectively promote the capital market and the internationalization of RMB. We know that there is no bright spot in the domestic investment market, the stock market is lifeless, the property market is under policy pressure, and a lot of funds are looking for new sources of investment. The launch of CDR will undoubtedly attract the attention of these capitals. Especially, many companies with outstanding global performance will definitely increase the issuance scale of CDR after discovering the benefits of financing in the domestic capital market through CDR, which will undoubtedly effectively promote the internationalization of capital market and RMB, and increase the voice of domestic capital market and RMB in the global capital market.

The third benefit of introducing CDR into domestic stock market is to accelerate the pace of survival of the fittest in domestic stock market. For a long time, the delisting mechanism of domestic stock market has been criticized by investors, and many listed companies that rely on government financial subsidies to maintain their balance of payments are stuck in the stock market. After the introduction of CDR, because the main funds are concentrated in listed companies with excellent performance, these listed companies with large losses in performance are naturally unpopular and can only fend for themselves.

For investors, by purchasing CDR, they can quickly share the investment opportunities and investment appreciation of overseas listed high-quality enterprises. However, investors need to be reminded that everything has advantages and disadvantages. When purchasing cdr, we must pay attention to the price and timing of purchase, and don't be fooled by foreigners.