Shengtong Faces CSRC Scrutiny Ahead of Hong Kong IPO

On July 26, the China Securities Regulatory Commission (CSRC) issued additional requirements for the registration of overseas issuance and listing, mandating that Shengtong Special Medical (Shengtong) provide supplementary information and legal opinions on several matters, including the legality and compliance of its historical shareholding changes. This comes as Shengtong prepares for its initial public offering (IPO) on the Hong Kong Stock Exchange.

The CSRC has specifically asked Shengtong to address several key areas. Firstly, the company is required to clarify the legality and compliance of its historical shareholding changes, including any instances where the controlling shareholder held shares on behalf of others. This involves a detailed review according to the relevant guidelines for shareholding. Secondly, Shengtong must provide a clear legal opinion on the pricing and fairness of the controlling shareholder's repurchase of company shares in 2024. Additionally, the company is required to explain the legality and compliance of all historical shareholding changes, providing a conclusive opinion on these matters.

Furthermore, the CSRC has requested that Shengtong review its employee stock ownership plans and equity incentive schemes in accordance with the relevant guidelines. The company must also clarify whether any of its existing or planned projects, including those funded by this IPO, fall under the categories of "high energy consumption" or "high emissions." This includes providing relevant evidence to support their classification.

The CSRC's scrutiny extends to Shengtong's subsidiary, which is involved in value-added telecommunications services. The company must explain the reasons for removing this business from its operational scope and provide updates on the progress of the relevant business registration changes. Additionally, Shengtong must confirm that it continues to meet the requirements of the "Negative List for Foreign Investment Access (2024 Edition)" both before and after the IPO.

Shengtong's business operations encompass mineral processing, smelting, copper product sales, and non-ferrous metal trading. The company's mineral processing and smelting activities are primarily conducted at its facilities. As of the last feasible date, Shengtong operates four production facilities, including two copper smelters and one copper concentrate flotation plant, and one copper smelter. The company's non-ferrous metal trading business is mainly conducted through its subsidiaries. During the reporting period, Shengtong's revenue was derived from the production and sale of cathode copper, the production and sale of copper concentrate, and the trading of non-ferrous metal products.

The CSRC's requirements for Shengtong reflect a broader trend of increased regulatory scrutiny for companies seeking to list overseas. This scrutiny is aimed at ensuring that companies comply with all relevant regulations and that their historical shareholding changes are transparent and legally sound. For Shengtong, meeting these requirements will be a critical step in its IPO process, as it seeks to raise capital and expand its operations. The company's ability to provide clear and comprehensive responses to the CSRC's queries will be essential in gaining regulatory approval and building investor confidence.