Chinese officials have influenced the decision of Syngenta, a Swiss-based agrichemical and seed company, to retract its $9 billion IPO submission in Shanghai due to apprehensions about its effect on an already unstable market, as informed by four sources.
Last Friday, the state-owned pesticide behemoth announced the cancellation of its IPO endeavor, attributing the decision to a thorough evaluation of the current industry climate and the firm's future direction.
Having sought to amass 65 billion yuan ($8.98 billion) through a listing on the Shanghai Stock Exchange's main board since last May, Syngenta had cleared the exchange's listing committee's scrutiny. Despite plans to pursue a 2024 listing, as stated by company officials in November, the necessary approvals from China's securities watchdog and the State Council's top brass were not forthcoming.
According to insiders, informal directives from the China Securities Regulatory Commission (CSRC) in March led to Syngenta, a Sinochem entity, aborting its plans for the significant listing.
Neither the State Council Information Office nor the CSRC responded to comments on the matter. Syngenta has chosen to remain silent beyond its initial statement.
The undisclosed motivations behind Syngenta's IPO withdrawal reflect Beijing's preference for bolstering investor confidence in the secondary market over introducing new stock offerings. This move comes despite the critical role of Syngenta's seeds in ensuring China's food security and grain self-sufficiency—a priority championed by President Xi Jinping.
The decision was primarily driven by the Chinese authorities' concerns over the potential destabilizing effect of a large IPO on the fragile stock market, which experienced a dismal beginning this year.
Analysts often point out that large IPOs can trigger market downturns by locking up significant amounts of capital, thereby draining liquidity from the secondary market. This concern is especially pertinent given the poor performance of mainland shares globally over the past three years and the deflationary pressures not seen since the 2008-09 financial crisis.
TIGHTER SCRUTINY
In response to a surge in IPO withdrawals, China's securities regulator has intensified its examination of new listings this year. This action follows the CSRC's announcement last August to decelerate the pace of IPOs and follow-on offerings to support the secondary market. The first quarter of 2024 saw IPO proceeds on the mainland plummet by 82% year-on-year to a mere $2.4 billion—the lowest quarterly figure since late 2018, according to LSEG data.
The recent downturn in China's IPO market, previously the largest globally, coincides with the CSRC's commitment under its new chairman, Wu Qing, to enhance the scrutiny of IPO candidates and address any regulatory breaches.
The anticipated listing of Syngenta, acquired by ChemChina in 2017 for $43 billion and later merged into Sinochem in 2021, was set to be China's and one of the globe's largest IPOs this year. The company has faced numerous delays since its initial filing in 2021.
Originally targeting a listing on Shanghai's STAR Market for its high valuation prospects, Syngenta shifted its application to the main board two years later. The company now aims to revisit the listing process in China or elsewhere and explore alternative financing options when conditions improve, with potential listing venues including Hong Kong, Zurich, and London.
(1 = 7.2357 Chinese yuan)
