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Harvard Business Case Oriental Fortune Capital: Building a Better Stock Exchange – The Case of ChiNext, the Shenzhen Junior Market
Case Researcher
149
N9-811-105
This case explores what is arguably one of the most successful efforts to promote the development of a public market for entrepreneurial firms over the past decade.
As you read the case, please consider the following questions:
1. Why has the Chinese IPO market been so hot at the time when IPOs have been so slow at most places in the world?
2. Why have ChiNext tried to have strong listing requirements? Have they focused on the right requirements?
3. How does the competition between the Shenzhen and Shanghai exchanges affect ChiNext?
4. How has the Chinese market changed? What are the implications for how ChiNext’s should adjust?
5. What can Western policymakers learn from the Chinese experience?
Josh Lerner
150
N9-811-105
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Listed companies 505 536 544 579 670 740 830 1,169
Market capitalization (RMB billion)
1,265 1,104 933 1,779 5,730 2,411 5,928 8,641
Total volume (RMB billion)
1,215 1,642 1,327 3,873 18,764 9,938 19,873 24,742
Daily average volume (RMB million)
5,042 6,757 5,485 16,073 77,539 40,401 81,448 102,242
167
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Listed companies 505 536 544 579 670 740 830 1,169
Market capitalization (RMB billion)
1,265 1,104 933 1,779 5,730 2,411 5,928 8,641
Total volume (RMB billion)
1,215 1,642 1,327 3,873 18,764 9,938 19,873 24,742
Daily average volume (RMB million)
5,042 6,757 5,485 16,073 77,539 40,401 81,448 102,242
19
169
Li
quid
ity
requ
irem
ents
Shar
ehol
ders
Sp
read
20
0 NA
10
0 30
0 40
0 NA
50
0 20
0
Publ
icly
held
sh
ares
25
% o
f iss
ued
capi
tal;
10%
if
capi
tal >
US$
61m
n (R
MB
400m
n)
25%
of i
ssue
d ca
pita
l; 10
% if
ca
pita
l > U
S$61
mn
(RM
B 40
0mn)
25%
of i
ssue
d ca
pita
l 25
% o
f iss
ued
capi
tal
1.1m
n sh
ares
NA
30
% o
f iss
ued
capi
tal;
OR
10%
of
100
mn-
50
0mn
shar
es
15%
of i
ssue
d ca
pita
l
Mar
ket
capi
taliz
atio
n of
pu
blic
float
NA
NA
US$3
.8m
n US
$6.4
mn
US$8
-20m
n de
pend
s on
st
anda
rds
NA
NA
NA
Stoc
khol
ders
’ eq
uity
Po
st IP
O:
US$4
.6m
n
(R
MB
30m
n)
Pre
IPO
: US
$4.6
mn
(RM
B 30
mn)
NA
NA
US$0
-30m
n de
pend
s on
st
anda
rds
NA
US$1
.6-3
.2m
n de
pend
s on
st
anda
rds
NA
Ope
ratin
g hi
stor
y 3
year
s 3
year
s 2
year
s 3
year
s 0-
2 ye
ars
depe
nds
on
stan
dard
s
NA
0-3
year
s de
pend
s on
st
anda
rds
NA
Fina
ncia
l re
quire
men
ts
(3
)
Prof
its
Aggr
egat
ed
US$1
.5m
n (R
MB1
0mn)
for l
ast
2 ye
ars;
OR
Aggr
egat
ed
US$4
.6m
n (R
MB3
0mn)
for
last
3 y
ears
; AN
D
NA
US$6
.4m
n fo
r las
t 3
year
s; A
ND
US
$2.6
mn
last
ye
ar (1
) ; OR
US$0
-1m
n de
pend
s on
st
anda
rds
NA
Ord
inar
y pr
ofit
NA
Cash
flow
NA
Ag
greg
ated
US
$7.6
mn
(RM
B50m
n) fo
r la
st 3
yea
rs; O
R
Aggr
egat
ed
US$2
.6m
n fo
r las
t 2
year
s;
NA
NA
NA
NA
NA
Reve
nue
US$7
.6m
n la
st y
ear
(with
net
pro
fits
of
US$0
.76m
n &
30%
re
venu
e gr
owth
for
last
2 y
ear)
Aggr
egat
ed
US$4
6mn
(RM
B300
mn)
for
last
3 y
ears
NA
US$6
4mn
last
ye
ar if
mar
ket c
ap
> US
$512
mn
(2)
NA
NA
NA
NA
170
22
171
22
23
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24
1 Shenzhen Capital Group Co., Ltd. Domestic 2 Sequoia Capital China Foreign 3 IDG Capital Partners Foreign 4 SAIF Partners Foreign 5 Shenzhen Fortune Venture Capital Co., Ltd. Domestic 6 Jiangsu Govtor Capital Group Domestic 7 Shanghai NewMargin Ventures Domestic 8 China Science and Merchants Capital Management Limited Domestic 9 Shenzhen Co-win Venture Capital Investment Limited Domestic 10 Legend Capital Domestic 11 Green Pine Capital Partners Co. Domestic 12 CDH Venture Ltd. Foreign 13 Shenzhen Oriental Fortune Capital Co., Ltd. Domestic 14 GGV Capital Foreign 15 SIG Asia Investment, LLLP Foreign 16 Intel Capital Corporation Foreign 17 Softbank China Venture Capital Foreign 18 Kleiner Perkins Caufield & Byers - China Foreign 19 DT Capital Partners Foreign 20 Walden International Foreign
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