A boom on China’s over-the-counter stock market has seen its ranks of listed companies swell 9 percent in the past two weeks, amid a backlog of initial public offering applications at the country’s exchanges.
The National Equities Exchange and Quotations hosts 8,622 corporations, according to its website, up 68 percent from the end of last year. That compares with 2,914 listed on the bourses in Shanghai and Shenzhen. Companies have this year raised 78.2 billion yuan ($11.8 billion) from share sales on Beijing-based NEEQ, known as the third board.
NEEQ’s rapid growth is helping to ease the thirst of small firms for capital and is also allowing regulators to develop a system in which companies get more flexibility on the timing and valuation of their share sales, which has been difficult to implement on the main venues. More than 800 companies are waiting for IPO approval on exchanges, according to the China Securities Regulatory Commission.
“The third board helps solve a big problem in China’s economy, allowing small and medium enterprises to raise funds despite a long queue for listings,” said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong.
Companies listed at NEEQ raise money by issuing new stock in placements after listing at the venue. Guangzhou Evergrande Taobao Football Club Co., China’s first soccer stock and backed by Alibaba Group Holding Ltd., listed its shares without raising money in November and sold 869 million yuan of new stock in December, according to a January filing. The sale price of 40 yuan a share valued the company at 15.9 billion yuan.