Brokers fight | In order to fight for CDR every week you need to visit Unicorn


Under the vigorous promotion of the regulatory authorities, recently, through the CDR model, a group of well-known 'unicorns' listed overseas are expected to return to A-shares, and their related progress has also become the focus of attention in the capital market. Some analysts believe that CDR can be basically Without changing the current legal framework, overseas listed companies will be more convenient and return A shares at a lower cost.

In fact, there are already many investment banks in the country. The law firm is gearing up to wait for the unicorn company to return to the A-share market.

Driven by the supervision, recently, through the CDR (China Depositary Receipts) model, a group of well-known 'unicorns' listed overseas are expected to return to A shares, and their related progress has thus become a focus of attention in the capital market. According to the analysis, CDR can make overseas listed companies more convenient and return A shares at a lower cost without basically changing the existing legal framework.

After the introduction of the CDR, it has been noticed by many big companies. There are domestic Internet companies and many brokers are big brothers. Who can share this piece of tea?

CDR may be the best way to return the unicorn

DR is the English abbreviation of depositary receipts. It refers to the transferable evidence of the foreign company's stock that circulates on the securities market of a country. It was originally the American Depositary Receipt (1927). British law prohibited British companies at that time. Listed overseas, British companies invented this financial innovation tool in order to raise capital overseas.

The so-called CDR refers to a company listed overseas that entrusts some of the issued shares to local custodial banks, is issued by a depositary bank in China, is listed on the domestic A-share market, and is settled in RMB transactions for sale by domestic investors. Investment certificate.

A few days ago, Tianfeng Securities released a research report that CDR may be the best way for Chinese companies and unicorn companies that are allowed to list overseas to list on A shares. Compared to modifying the new share offering system or allowing companies to change their shareholding structure, CDR may be adopted. Ways will be faster and cost-effectively overcome existing institutional barriers.

Zheng Jisha, chief analyst of China Merchants Securities' non-banking financial industry, said that although the issuance of CDRs does not necessarily require financing, from the current situation, companies that are willing to issue CDRs in A shares have more or less some financing requirements.

He believes that, in layman's terms, investors can understand CDR as a public offering; it is expected that in the future Alibaba, Tencent and other new economic giants are expected to use CDR to issue additional depository receipts of about 3% of their basic securities in A shares. The proportion of unicorns that have real financing needs to issue CDRs will be around 10%. He said that the introduction of CDR into A shares is expected to stimulate the vitality of the capital market and increase the activity of market transactions.


CDR is expected to become a new brokerage growth point

Many investment banks and law firms are gearing up for the unicorn returning to A-share listing. Some brokers have even given the task to all team leaders to require at least several unicorn company directors to visit or The founder. 'The insider of an investment bank revealed.

How do securities companies participate in CDR operations? Take ADR as an example: The ADR operation mechanism consists of four key links: Choosing trust depository and custody organization - ADR issuance - ADR underwriting - ADR trading, among which ADR issuance and underwriting is the core. ADR operations mainly involve five major institutions: issuing companies, depository agencies, custodian institutions, underwriters, brokers, where depository agencies and underwriters are the most important.

Take Alibaba, the largest ADR in history, for example. Alibaba (BABA.N) issued ADR to the United States in September 2014. IPO raised a total of US$25 billion. The company designated Citibank as its depositary agency and appointed 6 Wall Streets. The investment banks comprise the lead underwriting group. The revenues of participating organizations are ranked as follows: Underwriters (US$300 million)> depositaries/custodians (US$0.074 billion per year)> brokers (minimum of US$0.2 billion in 2017). Among them, underwriters earn 3. Taken as a one-time underwriting income, the depositary/custodian agency collects service fees on an annual basis, and brokerage commission income is also a continuous income.

Considering the actual affordability of the A-share market, it is expected that the number of ordinary shares issued by the company in the form of CDRs in the A-shares will be within 10% of the underlying securities. Currently, the total number of shares of the US-listed companies with a market value of more than RMB 20 billion is more than RMB 20 billion. 37, total market value of about 9.8 trillion yuan.

On March 23, 2018, the Torch Center of the Ministry of Science and Technology jointly announced a list of 2017 unicorn enterprises, including ant gold suits, drops, and millet, and 164 companies were short-listed with a total valuation of US$628.4 billion.

If the CDR's operating mechanism and business model have a high probability of referring to ADR, the securities company is more suitable to become the CDR's depositary institution. Under the CDR ecological chain, the securities company will reap three major revenue packages including underwriting, depository and brokerage transactions. Sexual underwriting income is the most significant, and deposit receipts and commission income are paid in quantity, and continue to contribute. It is estimated that by 2018, 2019, and 2020, it will bring 2.9 to 5.7 billion yuan and 1.1 to 2.3 billion yuan respectively to the securities industry. 11 ~2.3 billion in revenue.

However, the issuance of CDR imposes higher requirements on the overall quality of securities firms, and requires the operation of internationalized business capabilities and a relatively complete customer service industry chain. The issuance of A-share CDRs mainly increases the net profit of the top securities firms, and the degree of concentration in the securities industry is positive. With continuous improvement, and under the medium-to-long-term logic surrounding the innovation and development of institutional services, the leading edge of brokerage firms will become even more pronounced.

The research report recently issued by CICC pointed out that according to the China Gold Strategy Group, if Hong Kong stocks and domestic unicorns meet the four new standards, they can access the A-share market through the reform of CDR and quantitative financial indicators. The scale of financing will be approximately US$300 billion (approximately RMB 2 trillion). If 30% to 50% of the volume is to be listed in the next 3 to 5 years, the new financing needs will increase from RMB 100 billion to RMB 300 billion annually. The total size of A-share IPO financing in 2017 is about RMB 230 billion.)

The research report of CICC also stated that CDR’s contribution to brokerage’s revenue is reflected in underwriting sponsorship, depository custody and trading commissions, among which underwriting sponsorship is the main contribution. In 2017, the underwriting sponsorship revenue contribution from the brokerage industry was approximately 12%. Estimated IPOs account for 30% to 40% (ie, contribute 4% to 5% of total industry revenue).

If it is assumed that the underwriting rate remains unchanged (the domestic IPO rate is generally 5%-7%, the larger the financing amount, the lower the corresponding rate, and the large CDR actual rate may be low). It is estimated that if the financing amount is 2300 per year The increase of RMB 100 million to RMB 330 million is expected to increase the contribution of IPO revenue to 6% to 10% (2% to 5% of the industry's revenue will be thickened, ie, will be increased by approximately RMB 6 billion to RMB 17 billion).

It is worth mentioning that this time, the focus of China’s trade sanctions on China has focused on the new economic fields that have been under development in the national strategy under the new era of China. Financial institutions actively promoted 'Unicorn' to return A shares through CDR, which is in line with the current situation. Facts.