China’s CITIC Capital Holdings, a private equity firm, plans to list a subsidiary on the country’s most active over-the-counter (OTC) equity exchange, the company said Monday.
The company said it will list subsidiary CITIC Capital Equity Investment (Tianjin) Corp Ltd, which has $5 billion in assets under management, on Beijing’s New Third Board exchange to build an exclusive platform for its yuan-denominated private equity business.
A company spokeswoman said in an emailed statement to Reuters the listing would help it expand its fund raising channels and broaden its “investor base with domestic small-and-medium institutional investors and high net worth investors”.
A majority of the firm’s assets under management come from overseas investors, the company said on its website.
The company did not specify how much money they will seek to raise.
Banned by regulators from listing on main boards, CITIC Capital Holdings will join a slew of other Chinese private equity firms trying to tap the fast-growing New Third Board.
The exchange is already starting to see some fundraising transaction sizes exceed the mainboard IPO sizes of comparable companies.
Beijing Tongchuang Jiuding Investment Management Co., for example, this year raised 10 billion yuan ($1.57 billion) through the board and plans to raise another 5.5 billion yuan over the next few months.
“There are far fewer regulatory restrictions on the New Third Board than on the stock exchanges, and the market is more efficient,” said Gu Zhipeng, Jiuding’s board secretary. “Here, it takes about a month to get the green light for an additional share sale, but it would much longer on the stock exchange.”
Analysts and venture capitalists say the OTC market is attractive to private equity firms because it allows them to not only list but also indirectly offload stakes in stalled IPOs through listings.
However, there are signs that this market, which faces less regulatory scrutiny that more mainstream listing venues, is getting riskier due to the lack of broker experience in market making in China and the possibility of insider price manipulation.