Caixin News Agency, November 1st (Reporter Zhao Xinrui) Even if an IPO passes review, there are often instances of voluntary withdrawal. On October 29, the Shenzhen Stock Exchange announced that GEM IPO Day Day Shun withdrew its listing application with the sponsorship of China International Capital Corporation and China Merchants Securities.

Day Day Shun was accepted on May 12, 2021, and successfully passed review on May 25, 2023, but waited in vain in the registration stage for nearly a year and a half thereafter. The company updated the relevant information three months after the financial data in the application documents expired on March 31 this year but did not update or submit the required financial information on September 30. Ultimately, on October 29, Day Day Shun chose to withdraw its listing application.

With the enhancement of listing standards and positioning in various sectors, some companies have chosen to withdraw their applications due to unsatisfactory performance in the past year. The company's performance only slightly declined in 2022, achieving revenues of 14.036 billion, 17.163 billion, and 16.847 billion from 2020 to 2022, with net profits of 0.431 billion, 0.579 billion, and 0.575 billion during the same period.

It is yet to be determined whether the withdrawal is related to updating financial data, but the suspension of Day Day Shun's listing plan may be related to considerations by the shareholders regarding the overall business layout of their subsidiary companies.

The shareholders are among the top five customers, with a high proportion of related transactions.

Day Day Shun originated from Haier's home appliance distribution service system and is an enterprise under Haier Group that provides supply chain management solutions and scenario-based logistics services. Day Day Shun Shanghai is the controlling shareholder of the company, with Haier Group indirectly controlling Day Day Shun Shanghai, making it the ultimate controller of the company. The equity relationships related to Day Day Shun may also reveal why it chose to withdraw its listing application after passing review, and what the future development direction will be after delisting.

Originally part of Haier Smarthome controlled by Haier Group, on the same day that Day Day Shun terminated its listing review, Haier Smarthome announced the consolidation of Day Day Shun through the signing of a Voting Rights Entrustment Agreement. Haier Smarthome explained the reason in the announcement, stating that it is currently deeply promoting the transformation and upgrading of the Chinese market retail and overseas brand localization capabilities, with the key link being the comprehensive logistics capabilities covering warehousing, distribution, and delivery. It aims to fully achieve the strategic goals of improving operational efficiency, accelerating the transformation of business model, and creating new business growth points.

In fact, the company was originally within the Haier Smarthome consolidated financial statements, and the listing plan was not launched until August 2019. After a 4-year listing process, it has returned to the Haier group, which may also mean that the group will temporarily shelve the independent IPO preparation of RRS and expand the business territory of its holding companies as the main future development direction.

In addition to the equity relationships, the relationship between RRS and its shareholders and subsidiaries has also become a key point of regulatory concern about the company's operational independence.

During the reporting period, the revenue from the top five customers was 8.012 billion yuan, 9.008 billion yuan, and 9.152 billion yuan respectively, accounting for 57.08%, 52.48%, and 54.33% of the company's annual revenue. Among them, the revenue from affiliated Haier group customers accounted for 33.13%, 30.60%, and 31.55% respectively. Meanwhile, the revenue from affiliated Alibaba customers accounted for 15.80%, 15.00%, and 15.80% respectively.

RRS stated that its business cooperation with Haier group customers and Alibaba customers is based on equality, mutual benefit, and fairness. Due to the company's expansion speed, it is expected that there will still be substantial cooperation with Haier group customers and Alibaba customers in the foreseeable future.

Furthermore, RRS has a high overlap percentage of 62.92% with Haier Smarthome business outlets. Combining the high degree of affiliation, RRS's business independence from the Haier group may still raise market doubts.

It is worth noting that there is an equity relationship between the issuer and the two joint underwriters. According to the CDR prospectus, RRS's ultimate controlling shareholder, Haier group, indirectly holds 6.32% of the shares of the underwriter China International Capital Corporation through its indirect subsidiary Haier Financial Holdings. At the same time, directors and executive vice presidents of Haier group and the chairman of Haier Financial Holdings, Tan Lixia, also serve as non-executive directors of China International Capital Corporation.

Additionally, the other joint underwriter, China Merchants Securities, its controlling shareholder, ultimate controller, and key affiliates indirectly hold shares of the issuer and several shareholders, but the proportions are relatively small, mostly below 1%. The company has stated that besides the disclosed information in the CDR prospectus, there are no other direct or indirect equity relationships or other interest relationships.

46 IPO applications were terminated after passing the review due to voluntary withdrawal.

This year, among the companies withdrawing from the market, there are also some IPOs like Risheng, all choosing to withdraw after passing the review, totaling 46 companies.

Specifically, the GEM has the highest number of companies that have passed the review but still withdrew and were terminated, totaling 41. The remaining 5 companies that withdrew their IPOs are Shanghai Main Board IPO Juhua Technology, STAR Market IPO Crystal Semiconductor, Hua Zhuo Precision Technology, Runji New Materials, and BSE IPO Juhua Technology.

Among the 46 IPOs that have passed the review but still withdrew, Citic Securities has the highest number of sponsor institutions, with 6. Also in the top five are Haitong Securities (5), China Securities Co., Ltd. (4), Minsheng Securities (4), China International Capital Corporation (4).

Why do companies, even after successfully passing the review, choose to voluntarily withdraw? A person in charge of an investment bank told reporters that performance decline, failure to meet sector positioning requirements, major public opinion issues, etc., can all become the main reasons why companies choose to withdraw after passing the review. Exchanges have strengthened the positioning of listed sectors during the year, and some companies choose to withdraw or make reasonable choices because they cannot meet the new regulations.

Of note, Hua Zhuo Precision Technology from the STAR Market IPO, and Ruiyuan Technology from the GEM IPO, were both second-pass projects. The latest annual performance forecasts disclosed in the draft presentations of the two companies were higher compared to the same period of the previous year. However, Ruiyuan Technology's active withdrawal led to the end of a four-year IPO marathon. One reason for the withdrawal application was the accounting firm hired by the company, Dahua, which also played a role in pushing for the withdrawal.

In addition, there were cases this year where projects did not pass the review. Shanghai Main Board IPO Jinlong Shares, sponsored by Haitong Securities, was eventually terminated after the Listing Committee suspended its review and the withdrawal. Similar fates also included Xuanzhu Biology, a STAR Market IPO sponsored by China International Capital Corporation. The only project this year that did not pass the review was Shanghai Main Board IPO Shenghuabao, sponsored by Guotou Securities, which was ultimately terminated for not meeting relevant regulations.