After more than a year since the IPO application was accepted, the road to IPO for Newlake Futures has come to an end.

On June 5th, the Shanghai Stock Exchange announced the decision to terminate the review of Newlake Futures Co., Ltd.'s application for initial public offering of shares and listing on the main board. The Shanghai Stock Exchange stated that Haitong Securities, the sponsor of Newlake Futures, applied to the exchange for withdrawal of the sponsorship. According to relevant regulations, the decision was made to terminate the review of Newlake Futures' initial public offering of shares and listing on the main board.

Subsequently, Caixin reporters contacted Newlake Futures to understand the reason behind the sponsor's application for withdrawal, but as of the time of publication, the company has not yet responded. Based on the prospectus disclosed earlier, Newlake Futures plans to issue no more than 120 million shares and raise 972 million yuan. The planned use of funds includes, but is not limited to, supplementing the company's working capital, increasing net capital, moderately increasing branches and business offices, increasing investment in asset management business, increasing investment in risk management subsidiaries, and increasing IT technology investment.

According to Wind data, as of June 5th, 185 companies have terminated (withdrawn) their IPO review and declaration this year, including 36 companies planning to list on the Shanghai main board, 28 companies planning to list on the Shenzhen main board, and 48, 32, and 41 companies planning to list on the growth, STAR and Beijing Equity Exchange, respectively.

Futures brokerage business revenue accounts for over 60%.

As an established futures company, Newlake Futures (formerly known as Tiandi Futures) was established on October 23, 1995. Its main business includes futures brokerage, futures investment consulting, asset management, and risk management through its wholly-owned subsidiary, Newlake Ruifeng.

According to the prospectus disclosed earlier, Newlake Futures had operating revenues of 5.848 billion yuan, 7.364 billion yuan and 7.76 billion yuan in 2019, 2020 and 2021 respectively. The accumulated operating revenue over the past three years reached 20.972 billion yuan. The company's revenue in the first half of 2022 was 1.387 billion yuan.

In 2019, 2020, 2021 and the first half of 2022, the net profit attributable to the parent company's shareholders was 24.2923 million yuan, 77.0803 million yuan, 166.9 million yuan and 49.7213 million yuan, respectively.

Specifically, the company's revenue and net profit heavily depends on the drive of futures brokerage business. Revenues related to futures brokerage include net income from brokerage fees, income from exchange fee reduction and deposit account interest income.

The total revenue from this section during the reporting period was 149 million yuan, 201 million yuan, 324 million yuan and 135 million yuan respectively, and the proportion to operating revenue (minus sales cost of goods) exceeded 60%. Among this, the proportion of exchange fee reduction income to revenue (minus sales cost of goods) is also between 22.8% and 33.17%. During the reporting period, the profit from brokerage business accounted for more than 55% of net profit.

The level of commission income from trading mainly depends on the level of brokerage services provided by the company and the commission rate charged to customers. With increasing market competition and declining commission rates, there may be a risk of declining commission income. Reduced fee policy is affected by the policies of the major exchanges, and once the market environment changes significantly or the reduced fee policy changes significantly or is canceled, the operating conditions of futures companies will be significantly affected.

The impact of changes in the reduced fee policy on the net profit of futures companies has been evident since early this year. In January, CFA data showed that the net profit of the entire futures industry was 54 million yuan, a decrease of more than 90% month-on-month and year-on-year. CFA stated that the sharp decline in net profit in January was mainly due to the adjustment of the exchange fee reduction policy, which led to a decrease in income from brokerage services.

However, the net profit of the industry has rebounded somewhat since February 2024, and the latest data shows that the total operating revenue of futures companies in April of this year was 3.263 billion yuan, and the net profit was 827 million yuan.

The prospectus also mentioned that the company's risk management business has been developing well in recent years. In the first half of 2022, the net profit of the company's risk management business was 26.2744 million yuan, accounting for 52.84% of the company's net profit.

The pledge of equity by the controlling shareholder has attracted attention.

The pledge of equity by Huang Wei, the controlling shareholder of the company, was one of the issues that the China Securities Regulatory Commission focused on in its feedback on the IPO prospectus declaration draft.

In January 2023, the CSRC solicited feedback on the IPO prospectus declaration draft of Newlake Futures, requesting that the sponsor and the company's lawyers verify and state their opinions on the reasons and specific circumstances for Huang Wei's pledge of Newlake Group's equity, whether there is a legal risk of overdue repayment of debt resulting in the creditor's exercise of the creditor's rights, whether the pledge of equity will result in the actual controller of the issuer assuming a significant amount of debt and affecting the stability of the control right.

Later, xinhu futures updated its pre-disclosure. In March of the same year, its IPO application was accepted. As of the disclosure of the prospectus, xinhu futures' controlling shareholder is xinghe investment, which holds 54% of the company's shares. Previously, xinhu futures' shareholders included zhongfu industrial (22%), xinhu group (8%), xinhu zhongbao (7.67%), ningbo changda trade (7.44%), and shanghai shenghua investment management (0.89%).

Huang Wei indirectly controls 54.00% of xinhu futures' shares through xinghe investment, its controlling shareholder, and controls 22.00%, 8.00%, and 7.67% of xinhu futures' shares through zhongfu industrial, xinhu group, and xinhu zhongbao, respectively. In total, it controls 91.67% of the company's voting rights.

Regarding the aforementioned feedback, the prospectus shows that in July 2018, Huang Wei's stake in xinhu futures held by xinhu group was pledged, including Huang Wei's pledge of the principal and corresponding investment income enjoyed by fh investment xinhu group.

The above-mentioned share pledge was mainly based on the purpose of equity financing of xinhu group. Xinhu futures stated that xinhu group has made timely repayment and promises not to cause significant adverse effects on the company's control rights due to pledge. In summary, the above-mentioned share pledge does not significantly and adversely affect the stability of xinhu futures' control rights.

In recent years, the "xinhu system" stock financing moves, represented by Huang Wei, have occurred frequently. The latest announcement from xinhu zhongbao shows that as of June 4, it has pledged a cumulative total of 2.749 billion shares, accounting for 32.31% of the company's total share capital.

In addition, on January 9 of this year, xinhu zhongbao announced that its controlling shareholder, xinhu group, and its concerted action person, zhejiang hengxingli, intend to transfer 1.568 billion shares of the company, accounting for 18.43% of the total share capital of the company, to quzhou zhibao enterprise management partnership for a total cash consideration of RMB 3.006 billion.

After that, on April 15 and April 29, the first and second batches of share transfer agreements were completed and registered. The remaining batch of share transfer agreements has not yet been completed for registration.