Backdoor rumors have revived the enthusiasm of wine companies planning to go public

A few days ago, Xi'an Standard Industry Co.
, Ltd.
(hereinafter referred to as "Standard Shares") issued another announcement to refute rumors related to "backdoor borrowing by wine enterprises
".
In fact, this kind of news is not new
.
This year, a number of listed companies have been involved in rumors of "backdoor borrowing by wine companies", which has triggered stock price changes
.
"Since the A-share listing of Jinhui Liquor in 2016, no liquor company has successfully passed the IPO, and the current regulatory authorities have strict restrictions on liquor securitization, which may give the market room for imagination about backdoor listing
.
" Industry insiders said that there are many uncertain factors in backdoor listing, which is not a simple matter, but the frequent rumors to a certain extent reflect the enthusiasm
of wine companies for listing.

Rumors abound

On November 28, Standard Shares issued an announcement saying that the company was not involved in negotiations or negotiations with wine companies such as "backdoor borrowing" and "restructuring", nor did it plan to engage in wine-related business, and the relevant rumors about the company's "backdoor borrowing of wine enterprises" were not true
.
Neither the Company nor its controlling shareholders have any plans
to change their main business or make significant adjustments to their main business in the next 12 months.

This is not the first time that the rumor of "backdoor borrowing by wine companies" has appeared and responded to Standard Shares, and on November 24, Standard Shares announced that it denied the rumors
related to "backdoor borrowing of wine companies".

Rumors of "backdoor wine companies" once stirred up the share price
of Standard Shares.
From November 17 to 23, standard shares achieved a 4-day limit
increase in 5 consecutive trading days.
On November 23, Standard Shares issued an announcement that after the company's self-inspection, the company's current production and operation activities are normal, and the external environment has not undergone major changes
.
After that, the stock price closed down
for 3 consecutive trading days.

In fact, there are many relevant reports this year, from Guirope Shares, Guiguang Network to *ST Tiancheng, Global Printing, Xi'an Catering, Meierya, Qunxing Toys, and then to the recent Caride, Standard Shares.
.
.
A number of non-alcoholic listed companies have been "Amway", and the most "nominated" Guirope shares have issued 15 announcements since July this year, covering topics such as clarifications, abnormal fluctuations in stock trading and related replies
.
The rumors also caused the share price of Guirope to fluctuate unusually, and in less than two months after the rumors appeared, the share price of Guirope shares soared by nearly 180%.

Why do stocks "rise when they get drunk"? Bai Wenxi, chief economist of IPG China, said that it is difficult for wine companies to list independently, but some wine-related companies have better profits and cash flow, so there is a phenomenon of "backdoor borrowing of wine companies" and "wine will rise" in the A-share market, especially some ST concept stocks that urgently need to be
restructured.

"Driven by Kweichow Moutai, Chinese liquor has been very active in the capital market, and at present, many external capital invests in baijiu as an important capital 'hedging' channel, and most breweries are in economically underdeveloped areas, which may receive certain policy preferences and support, which together promote the enthusiasm of capital for the liquor industry
.
" Cai Xuefei, an analyst in the liquor industry, said
.

There are difficulties in backdoor listing

Backdoor rumors have frequently emerged, reflecting the obvious increase in enthusiasm for wine companies planning to go public in the past two years
.

"In 1994, Shanxi Fenjiu became the first stock of baijiu, and its popularity, image, performance and production capacity have achieved milestone development, which not only filled the gap in the stock market of Shanxi and Chinese liquor at that time, but also rewrote the pattern of the liquor industry and opened the door
for Chinese liquor to conquer the capital market.
" Industry insiders said that there is no doubt that listing has benefited wine companies a lot, which can be seen from the clear statement in many provinces to cultivate listed wine companies from the policy and the market value performance of 19 liquor listed companies
.

Cai Xuefei pointed out that at present, China's wine industry has entered the stage of consumption upgrading, and under the environment of stock compression, competition has developed to two dimensions: brands premised on culture and production areas premised on quality
.
The combination with capital is conducive to the national promotion, high-end brand development and product structure upgrading
of developing wine enterprises.

Xiao Zhuqing, a liquor analyst, also said that liquor listed companies can better integrate upstream and downstream supply chains, obtain financing, and have more advantages
in low-cost expansion and mergers and acquisitions.
Therefore, many liquor companies are seeking to go public, and hope to acquire other regional leading liquor companies
through private placement or share exchange after listing.
"The alcohol sector has always adhered to the position of the real economy, which is more mature and stable than other emerging industries, and in the current environment of encouraging investment, the successful listing of new alcohol companies will surely bring new opportunities to investors, and will also bring more funds and benefits to the development of the industry, which is worth looking forward to
.
" Industry insiders said
.

According to incomplete statistics, the total number of wine companies that have announced capital market plans and proposed listing targets in the next few years in 2021 exceeded 30
.
Since the beginning of this year, some new actions of some wine companies have once again triggered the market's speculation about their listing, taking Xijiu as an example, since July, its series of operations such as "shedding" and changing coaches have been speculated by the industry or paving the way
for listing.
Not only Xijiu, but also Xifeng Wine, Jinjiu, etc.
that are considered to be speeding up their listing this year
.

Despite the surging listing boom of wine companies, it is regrettable that the "successful" listed ones have not been seen
.
In fact, since Jinhui Wine was listed on the Shanghai Stock Exchange in March 2016, A-shares have not seen a new wine company independently listed for more than 6 years.

Zhang Cuixia, chief investment consultant of Jufeng Investment, said that on the one hand, regional characteristics and the business model of relying on distributors have become the shackles of wine companies going public; On the other hand, the policy is very strict for the listing of wine enterprises, the most typical of which is the "Declaration and Recommendation Rules" issued by the Shenzhen Stock Exchange in June 2020, which clearly stipulates that in principle, 12 types of industry enterprises, including "wine, beverage and refined tea manufacturing", will not be supported to list
on the Growth Enterprise Market.

"For wine companies, backdoor listings can reduce costs and shorten the time
to market.
" Zhu Danpeng, vice president of Guangdong Food Safety Promotion Association, said that there are many uncertainties in backdoor listing, but from the perspective of capital and industry, backdoor listing is still relatively fast
.

Wu Wanying, a senior researcher at the Digital Economy Think Tank, also said that if wine companies want to go public as soon as possible, backdoor is indeed a shortcut, but if it is a backdoor listing, the information
must be disclosed in accordance with the regulations.

Even so, it is not easy
for wine companies to go public through backdoors.
Zhang Cuixia said that backdoor borrowing can indeed shorten the listing time of wine companies and reduce costs, but there are also certain drawbacks, and in the past, some companies did not perform satisfactorily
after listing through backdoor listing.
From the perspective of whether the premium of shell resources is too high, whether the backdoor wine enterprise can effectively connect with the original main business, and whether it can effectively dispose of the cost including the sales end and the liability side, the backdoor wine enterprise will still face many difficulties
.

(Gu Yufei, comprehensive sorting)

China Food News(Version 04, December 05, 2022)

(Responsible editor: Gu Yufei).