China to Facilitate AI Unicorns’ Going Public

The Chinese government is going to make it much easier for artificial intelligence unicorns to go public on its stock exchanges.

Chinese media is reporting that several domestic brokers and investment banks were recently informed by the China Securities Regulatory Commission (CSRC) that it will relax regulations on prospectus approval time and profitability minimums for Chinese unicorns in the domains of artificial intelligence, cloud computing, biotech, and high-end manufacturing.

A Chinese AI unicorn C-level executive who asked not to be identified told Synced he believed many AI startups — particularly those in computer vision such as SenseTime, Face++, CloudWalk, and Yitu — will benefit from the loosened rules and soon go public.

The CSRC has not yet publicly commented on the news reports, nor has it released any official statements regarding any changes to its current regulations.

The new regulations are expected to shorten prospectus approval time from an average of eight months to just two or three months, while also lowering profitability minimums for qualified young Chinese AI unicorns.

Until now, in order to go public, Chinese companies were required to show a positive net profit for each of the last two to three fiscal years, and have a cumulative net profit for the period of not less than CNY￥10 to 30 million.

China AI unicorns’ variable interest entities (VIE) — wherein an investor holds a controlling interest that is not based on share ownership — may no longer be an obstacle to their going public.

Many global tech startups are now going public, a trend that is expected to break out through 2018 and 2019. Sweden-based music streaming service Spotify recently filed direct listings on the New York Exchange, valued at US$20 billion. China’s Netflix-like video streaming platform IQIYI and its high-end electric SUV maker NIO are also working on US stock market listings this year. Uber and Airbnb are expected to go public in 2019.

China is eager to embrace its next-generation tech innovators and reform its IPO procedures. Earlier this year, the CSRC released a statement saying it is a vital “to absorb the mature and effective systems and methods from international capital markets, and reform the system of issuance and listing.” On February 9, the Shenzhen Stock Exchange issued its Strategic Plan for Development (2018-2020), shining a spotlight on unicorns in emerging industries.

China’s official press agency Xinhua News recently published the article “To Achieve a BATJ [Baidu, Alibaba, Tencent, JD.com] Dream in China’s Capital Market,” which urged institutions to clear hurdles for local tech companies entering China’s capital market.

Last month, the world’s largest contract electronics manufacturer Foxconn filed an IPO on the Shanghai Exchange to raise US$4.5 billion. It took Foxconn less than a month to go from prospectus filing to pre-disclosure update, a process that usually takes eight months. The company is expected to get its prospectus approval this March.