Fujian Guizhentang Pharmaceutical, a Chinese bear-bile harvester, pulled its IPO this week under pressure from animal rights activists. But it’s not alone: 269 companies have done the same—including 16 banks—and the reason is likely connected to a recent clampdown on fraud.
IPOs in mainland China have been suspended since October as the China Securities Regulatory Commission attempts to clean up a process with a nefarious reputation. In 2012 over a third of 155 newly listed companies experienced a decline in profits in the first three quarters after their listings, with 28 falling more than 20%. In May the CSRC fined one brokerage, suspended another and warned a third for failing to apply due diligence when vetting listings, according to Reuters.
IPO applicants were instructed in January to conduct a closer inspection of their own books to pull out inconsistencies and ensure information was correct. That self-inspection period came to an end in April, when the CSRC began spot-checking. Approvals are expected again from around August, but the regulator has been absolutely clear on one thing: earnings manipulation and financial irregularity will result in legal action. It looks like IPO hopefuls have paid attention.
More from Quartz