Recently, significant modifications have been made to the regulations governing abnormal pricing behavior by offline investors during the subscription process for initial public offerings (IPOs). The new guidelines clarify how to identify such abnormal behavior using a combination of qualitative and quantitative assessments, and outline the applicable scenarios and self-regulatory measures.

New Regulations Overview

Under the new regulations, any offline investor found to engage in abnormal pricing behavior for the first time will be placed on a "watch list," which subjects them to focused monitoring and remindersShould the same investor engage in abnormal pricing again within twelve months of being placed on the watch list, they will be classified as an "abnormal investor" and face a three-month prohibition from participating in offline inquiry and allocation activities

If they commit a further violation within a year of being placed on the abnormal list, they could face a written self-regulatory penalty, restricting their participation for six to thirty-six months.

Importance of Regulation

The primary purpose of offline inquiries is to leverage the pricing capabilities of institutional investors to establish a reasonable issuance price for new sharesIf inquiry agencies engage in reckless pricing, it undermines the essential goal of determining fair stock valuesHistorically, many new stock issues have been priced above their intrinsic value, leading to inflated market pricesTherefore, strengthening self-regulatory measures against abnormal pricing behavior by offline investors is indeed necessary.

Market-Oriented Approaches

However, the approach to penalizing abnormal pricing could benefit from market-oriented practices

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Some pricing actions may seem unusual at first glance, but they can yield profits once the new shares hit the marketThis raises questions about the criteria used to judge abnormal pricingThus, the assessment of whether an offline investor's quote is abnormal could be left to market forcesMoreover, the rights of every investor to submit their quotes should be respected.

Flexibility for IPO Companies

For a company considering an IPO, the decision to use inquiry-based pricing or a fixed pricing model should be left to the company's discretionCompanies can either set a price based on past practices—such as not exceeding a price-to-earnings (P/E) ratio of 23—or opt for inquiry-based pricingIf a company chooses a fixed pricing strategy, it wouldn't need to conduct offline inquiries or allocate shares offline, instead offering all available shares directly to online investors.

Competitive Bidding Process

In the case of inquiry-based pricing, a competitive bidding process could be employed

The allocation limits for each investor would be determined based on the total offline issuance quotaInvestors would need to specify both their quotation and the number of shares they wish to purchase, along with full payment of the quoted amountThis means that online inquiries would also require full payment for subscriptionsAny bids that do not meet the full payment requirement would be deemed invalid and eliminated from consideration.

Following this, the issuer would allocate shares based on the order of the highest quotes until the offline issuance quota is exhaustedIn cases where multiple investors submit the same bid, shares would be distributed based on the order in which the bids were receivedThe final allocation would then establish the new issue price, which would be used for shares allocated to online investorsThus, investors who bid higher would receive their subscriptions at the higher price, while those who bid lower would pay a correspondingly lower price

Conversely, those who bid too low would lose their eligibility to subscribe.

Investor Protection Fund

Additionally, any amounts exceeding the issuance price that offline investors contribute should not revert to the issuer but instead be allocated to a unified investor protection fund for future compensatory purposesRegulatory bodies could establish a standardized method for creating this investor compensation fund, with excess subscription amounts from IPOs serving as one of its funding sourcesThis fund could be utilized to compensate investors who suffer losses due to abnormal market conditions or pricing discrepancies.

Balancing Rights and Responsibilities

Adopting a competitive bidding approach for offline inquiries respects investors' rights to quote prices freelyEach investor can submit bids according to their preferences without being constrained by rigid rules

At the same time, investors must take responsibility for their quotes, ensuring they pay the full amount required for their subscriptionsThis balance of rights and responsibilities is crucial for fostering a healthy investment environment.

Conclusion and Recommendations

In conclusion, I advocate for implementing a competitive bidding process for offline inquiriesThis approach not only honors the rights of investors but also introduces a level of accountability and market discipline that can ultimately lead to fairer pricing and improved market integrityBy allowing investors to participate more actively in the pricing process, the market can better reflect the underlying value of new issues, fostering a healthier investment environment for all stakeholders involved.

Furthermore, adopting a market-oriented approach to abnormal pricing can enhance the overall efficiency of the IPO process