Shenzhen, China-based broker-dealer, Fox Capital Partners, says that talks it is engaged in with a sustainable energy startup company aimed at its floatation on one of China’s mainland indices have stalled following objections from one of the company’s private equity backers.
Fox Capital Partners, which has been advising the as-yet-unnamed startup’s senior executives on matters relating to an initial public offering, says the backer’s objection centered on the tenure of its interest in the company after floatation.
Ollie Seigler, head of energy research at Fox Capital Partners, said, “I’m told that the snafu has arisen over the kind of stock the backer is being offered and the duration of the ‘lock-up’ period said stock would be subject to. My understanding is that they want preference shares with a lock-up of no longer than 6 months but are currently being offered ordinary shares with a 12 month lock-up.”
A lock-up is the terminology given to the period of time in which insiders at a company that has gone public are contractually prevented from selling their stock on the open market. This restriction helps prevent the market being saturated with the company’s stock following an IPO since insider stock sales can have a significant impact of the way it is perceived by the wider market.
“To be perfectly honest, I think they’re getting way ahead of themselves here,” added Seigler. “The CSRC’s (China Securities Regulatory Commission) ban on IPOs imposed earlier this year is still in force and there haven’t been any hints as to when that ban might be lifted. There’s plenty of time to reach a compromise that will satisfy all parties and I know that the Fox Capital Partners team will be keen to accommodate all stakeholders.”
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