New valuation system for high-tech, innovation firms on STAR Market

Chinese securities regulators recently launched a new policy on valuation standards for “high-technology and innovation firms” on the SSE STAR Market, which are expected to clarify and accelerate new offerings on the NASDAQ-style sci-tech board.

The evaluation standard comprises three requirements: research spending over 5 percent of revenue or over 60 million yuan (US$8.6 million) annually; over five invention patents related to major business; and revenue growth over 20 percent annually in the latest three years, or over 300 million yuan in the latest year, the China Securities Regulatory Commission (CSRC) has said.

Firms that don’t meet these requirements can also be regarded as “high-technology and innovation” firms if they meet certain exception clauses. These would cover firms with core technologies or patents, national technology awards or technologies or products which can relieve technology imports in key sectors, according to the regulator.

The valuation standards clarify the IPO process, which will cut costs and time for IPO preparation in the STAR Market, said Dai Kang, an analyst at GF Securities.

The valuation system represents key technology and research development of various kinds of firms. It will reduce costs, improve work flow and speed up IPO processes the STAR Market, said CITIC Securities in a report. 

At present, 69 firms meet the three basic requirements, accounting for 75 percent of the 92 already-listed STAR firms.

The new valuation system is a guideline policy, which is not a new mandatory entry threshold of the STAR market, said CSRC.