And Finally

Dogged performer

China’s IPO bankers are having a tough time

Tibetan Mastiff w

An angry client

As underwriters of new listings in China, IPO sponsors are obliged to publish an investment report explaining why they are recommending the company. Suspecting, perhaps, that many investors don’t read these documents, some of the firms that make the filings are occasionally slapdash. For example, in 2012 Haitong Securities launched an offering for Daoming Optics, a lighting firm. By accident it copied and pasted its report for a different company, Yaoji Poker, which makes playing cards.

After this fiasco the market watchdog, the China Securities Regulatory Commission (CSRC), introduced tighter rules. Listing sponsors were required to conduct more stringent due diligence or risk punishment. Ping An Securities, for instance, was fined Rmb76 million ($11.72 million) in 2013 for its role in the fraudulent IPO of Wanfu Biotechnologies (see WiC194).

With each new round of regulation the IPO bankers have found their jobs getting tougher. But last week an employee from Minsheng Securities discovered that his own due diligence work was not only stressful but dangerous.

Shi Weidong, the general manager of the Nanjing branch of the brokerage was attacked by a Tibetan Mastiff dog during a visit to a newly-listed firm that Minsheng had sponsored. According to a widely forwarded WeChat article, Shi was parking his bicycle (a thrifty investment banker, it seems), when the massive dog charged out of the client’s offices towards him. Shi took refuge behind some railings but not before he had been bitten in the backside (for more on this expensive dog breed, see WiC199).

Remarkably Shi continued with his company inspection. “He didn’t get vaccinated until six hours later after two meetings with the company’s executives,” claimed the WeChat article, which was written by one of his colleagues.

Shi’s diligence became a hot topic across social media, winning over a lot of admirers within the financial services community.

“All brokerages should be looking to hire him from now on,” one fan wrote on Minsheng’s weibo account.

However, the investing public didn’t show the same level of sympathy (presumably because many retail investors are still nursing losses from China’s notoriously volatile share market.)

“Obviously he has not done enough research on the company,” one internet user wrote, implying that Shi should have known about the dog, and classed it as a rather unusual ‘risk factor’.

IPO bankers like Shi can expect further scrutiny from the CSRC’s new boss Liu Shiyu in the months ahead. Speaking at a Shenzhen conference last week, Liu again called for more investor protection. “Institutions should put more emphasis on the protection of investors’ legitimate rights and contribute to the healthy development of the capital market,” he said.

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