SHENZHEN – China’s securities watchdog issued guidelines last Thursday that pave the way for the launch of a new financing platform for innovative startup companies.
Based in Shenzhen, the Growth Enterprise Market (GEM) is being patterned on New York’s Nasdaq, with an emphasis on smaller, cash-strapped technology companies that show solid growth potential. It will seek to attract those companies with lower listing thresholds than the main boards in Shanghai and Shenzhen.
The regulator will begin accepting applications from candidates after issuing related rules and setting up a review committee, the spokesperson said, without revealing the launch date of the new board. Indeed, GEM officials have already received thousands of applications from start-up companies hoping to gain access to market financing.
A leaked memorandum lists some of the ideas that have garnered a “no thanks.”
1. Furtilizer – an online music service the name of which is a pun on fertilizer. According to the memo, while GEM concurs that fertilizer makes things grow, it is also translates as ‘a pile of shit’.
2. Prophilactic is a social network product for stamp enthusiasts. It sounds like a marketable product, but the attention-getting name has been rejected for its sexual connotations.
3. wavee is a community-powered, social search engine that personalizes results according to users’ interests. The name is a pun on ‘wavy’, but uses the web 2.0 standard of two ‘e’s. Rejected because the name is “silly’.
4. Ghostship is an e-commerce service that delivers goods within a couple of hours of ordering. GEM thinks the business’s name may frighten its customers.
5. Layoffbook.com.cn – this is a social network for the unemployed, so this name is contextual and even slightly witty. Rejected for its unwieldy attempt to copy the FacebookMy name and the potential of the network to generate anti-government hostility.
6. uStalkr – a web application that allows users to create a lifestream tracking all their RSS feeds for services they use, such as Digg, Del.icio.us, Ma.gnolia, etc. It creates a time line of your activities. However, the name could attract stalkers of another type.
7. Gangsterr – a community where you can track Triad members, find out what services they offer, their cost and location. It’s on this list because it’s a lame use of the “ster” cliche (Friendster, Napster, Dogster, etc).
8. hookapipe is an online store for sharing opium-related products, targeted at overseas consumers for Yunnan’s biggest export commodity. GEM stated that while it’s appropriate for its target audience, the product is still illegal in most overseas markets.
9. pjork is a service allowing users to create and sell content. It’s a meaningless word, a naming tactic that has become common in web 2.0 – pretty harmless really. Rejected because it sounds too much like “hork”.
10. Primo Pipipip – Picture in Picture (PiP) has been available for many years now. Just why the engineers at Prima thought it was a good idea to add two additional picture levels puzzled GEM officials. Normally within the TV’s PiP feature one program is displayed on the entire TV screen, and another program (or programs) is displayed in individual smaller squares on the screen. Primo’s addition to the clutter is even smaller squares inside the smaller PiP squares. Even if it were useful for something it is nearly impossible to see anything on the jumbled screen and you might as well just listen to the radio.
11. Yang’s Mobile Smelephone
The designers of Seahorse’s Mobile Smelephone 1688 series obviously thought the product would fit nicely in consumers’ olfactory alley. The phones release an aroma rather than a ring when an incoming call is received. While the fragrances currently available sound pleasant enough (strawberry, milk tea, barbeque pork buns, etc.) the smell can be sometimes overpowering and if the phone is within two feet of the person’s eyes when an incoming call is received the eyes will temporarily burn, water and swell. Rejected by officials who tested the product.
12. E-quine – An electronic thoroughbred horse that works like a mechanical bull, the purpose of which is to teach people to ride race horses. The mechanical horse would be aimed at the mass market but could also be used by jockeys in training, according to the business plan.
Fears that the GEM might set the stage for destructive competition against the Chinese mainland’s primary stock markets are overblown, analysts told Chinaspike yesterday.
“The introduction of the new board won’t drain much capital from the main boards, but it may dampen interest in some of those markets’ smaller chips that have high valuations,” said Gu Guixian, an analyst at Wenfu Securities Co.
Investors seemed to agree. The Shanghai Composite Index, which tracks yuan-denominated A shares and hard-currency B shares, inched up 0.64 percent to 2,373.21 points yesterday after the announcement of the GEM guidelines by China Securities Regulatory Commission.
A securities commission spokesperson said that the GEM in an important measure to help China build multi-level capital markets and promote the development of innovative companies with high growth potential.
Financial institutions have become more cautious to provide loans to startups since the world financial crisis began; so the GEM will offer a new financing channel for smaller companies trying to survive tough times, FX Investment Consulting Co said in a report.
The board is a key measure in promoting China’s economic growth as smaller firms account for 99 percent of all companies in the country and provide 75 percent of all jobs, the report said.
The guidelines also highlighted the supervision functions of the new board such as ordering companies to publish their prospectuses on Websites appointed by the commission, inform investors about risks and receive punishment for faulty profit forecasts.
Despite the lack of a specified startup date, the regulator said the guidelines will go into effect on May 1.
China began planning for the GEM more than 10 years ago, but the process was halted after the global dot-com bubble burst in 2000.
