The boundaries of industries listed on the Beijing Stock Exchange are clearer, with no hope for medical aesthetics and gaming?

Established less than three years ago, the Beijing Stock Exchange, originally seen as a potential domestic listing venue for some controversial industries, is now facing a shrinking space for certain restricted industries to list on the exchange, based on recent communications with regulatory authorities and sponsoring institutions.

Since 2022, companies in the medical aesthetics industry have failed in their attempts to IPO on the Science and Technology Innovation Board (STAR Market) and the Growth Enterprise Market (GEM), which was once seen as a signal of restrictions on IPOs in this industry in Shanghai and Shenzhen. However, during the same period, the Beijing Stock Exchange saw the listing of "Jinbo Biology, the first collagen stock on the Beijing Stock Exchange (832982.BJ)" and "Thunder Magic Technology, the first e-sports equipment stock on the Beijing Stock Exchange (872190.BJ)", injecting confidence into the market that the Beijing Stock Exchange still provides a possibility for domestic listings in the medical aesthetics and gaming industries.

However, this expectation may be shattered.

Recently, in communications with sponsoring institutions, regulatory authorities have clarified that there are restrictions on listings of real estate, educational, medical aesthetics, gaming, and elimination industries on the Beijing Stock Exchange.

Among them, it has been an industry consensus that real estate, educational, and elimination industries face restrictions in applying for listings on the Beijing Stock Exchange. However, the inclusion of medical aesthetics and gaming in the restricted list means that the arbitrage expectation for companies in these two industries to switch from Shanghai and Shenzhen to the Beijing Stock Exchange has disappeared.

Perhaps all of this was foreshadowed. In March of this year, the operating entity of the "Chuang Fukang" medical aesthetics mask, Chuanger Biology (831187.NQ), voluntarily withdrew its application for listing on the Beijing Stock Exchange.

With the Beijing Stock Exchange also imposing restrictions on medical aesthetics and gaming, the market is still closely watching the fate of medical aesthetics companies like Wuhan Qizhi Laser Technology Co., Ltd. ("Qizhi Laser") that are in line to list on the exchange.

Medical Aesthetics Faces New Constraints

It has long been stipulated that real estate, educational, and elimination industries have no hope of listing on the Beijing Stock Exchange.

According to the "Guidelines for the Application of the Business Rules for Public Offering of Stocks to Unspecified Qualified Investors and Listing on the Beijing Stock Exchange No. 1", financial and real estate companies are not supported to list on the Beijing Stock Exchange; at the same time, issuers cannot belong to industries with overcapacity and elimination, and companies engaged in pre-school education, subject-based training, and other businesses are also not allowed to list on the Beijing Stock Exchange.

However, the recent statement from regulatory authorities that medical aesthetics and gaming companies are not supported to list on the Beijing Stock Exchange may have exceeded market expectations. Previously, the market expected hidden restrictions on the IPOs of medical aesthetics companies in Shanghai and Shenzhen, but the Beijing Stock Exchange was considered one of the few choices for such companies to enter the domestic capital market.

On the Shanghai and Shenzhen markets, in August 2023, "tangential" medical aesthetics mask company Fu'erjia (301371.SZ) successfully landed on the GEM, but in its IPO application materials, it consistently distanced itself from the medical aesthetics industry.

The prospectus showed that Fu'erjia did not emphasize its "medical aesthetics" attributes too much, but instead used the term "special beauty", downplaying its relevance to the medical aesthetics concept.

Strictly speaking, Fu'erjia's mask products are mainly used for postoperative repair of medical aesthetics projects such as photorejuvenation, rather than directly related to medical aesthetics purposes.

However, some medical aesthetics projects have successfully transitioned from the Science and Technology Innovation Board to the Beijing Stock Exchange.

In June 2020, collagen company Jinbo Biology submitted an IPO application to the Science and Technology Innovation Board, but after two rounds of inquiries, it voluntarily withdrew the IPO application and switched to the Beijing Stock Exchange in June 2022 During the reporting period from 2020 to 2022, Jinbo Biotech's revenue from its medical aesthetics business was 21 million yuan, 50 million yuan, and 193 million yuan respectively, accounting for 13.22%, 21.48%, and 49.55% of the total revenue.

During the inquiry process, Jinbo Biotech admitted that the proportion of revenue from the medical aesthetics business was relatively high during the reporting period.

"During the reporting period, a significant proportion of the company's current revenue comes from medical beauty institutions, and the proportion of revenue from products ultimately sold to medical beauty institutions has been continuously increasing," Jinbo Biotech pointed out.

Nevertheless, in July 2023, Jinbo Biotech successfully landed on the Beijing Stock Exchange, which is also seen as a signal that medical aesthetics companies have the opportunity to list on the Beijing Stock Exchange.

Following the restriction on medical aesthetics companies listing on the Beijing Stock Exchange, the first to be affected may be projects in the process of listing on the Beijing Stock Exchange.

In October 2023, Qizhi Laser's application for listing on the Beijing Stock Exchange was accepted by the National Equities Exchange and Quotations (NEEQ), and is currently in the second round of inquiries.

Qizhi Laser's key product is the intense pulsed light therapy device used to treat pigment deposition, commonly known as the "photon skin rejuvenation device."

At that time, Qizhi Laser was concerned that its medical aesthetics project listing might be hindered, so it "manually" modified the revenue classification criteria before applying for listing on the Beijing Stock Exchange, changing the classification criteria for product revenue in the financial reports from 2020 to the first quarter of 2023 to unified categories of light therapy, laser surgical equipment and accessories, rather than the previous description of "beauty equipment, urology equipment, spare parts, and maintenance technical services."

This move did not escape regulatory inquiries.

In February of this year, during the second round of inquiries, the Beijing Stock Exchange directly requested Qizhi Laser to explain the proportion of revenue from its medical aesthetics business.

According to the application materials, from 2020 to the first three quarters of 2023, Qizhi Laser's medical aesthetics revenue was 54 million yuan, 84 million yuan, 86 million yuan, and 78 million yuan respectively, accounting for 30.20%, 34.91%, 34.89%, and 39.49% of the total revenue.

With the background of revenue accounting for close to 40% during the reporting period, Qizhi Laser may find it difficult to escape its relationship with the medical aesthetics business. How the listing process will be affected remains a focus of the market's attention.

At the same time, some medical aesthetics companies already listed on the New Third Board may have difficulty moving to the Beijing Stock Exchange.

In March of this year, the operating entity of "Chuang Fukang" medical beauty mask, Chuanger Biology, which withdrew its application for listing on the Beijing Stock Exchange, and the terminal medical beauty institution Hua Han Stock (430335.NQ) may also find it challenging to pursue listing on the Beijing Stock Exchange in the short term.

Against this backdrop, whether medical aesthetics companies will turn to the Hong Kong Stock Exchange is attracting significant attention.

Is there no successor to the "First Stock of Esports"?

Indeed, game companies face challenges in going public.

Since 2018, after the game company Guangzhou Duoyi Network Co., Ltd. voluntarily withdrew its GEM IPO application, there have been almost no game companies striving to go public on the Shanghai and Shenzhen markets.

However, there is indeed a precedent of companies "related to" games successfully listing on the Beijing Stock Exchange. At the end of December 2022, Thunder Fire Technology (872190.BJ), controlled by Haier Group, successfully landed on the Beijing Stock Exchange As a computer hardware equipment manufacturer, Thunderobot's main products include laptops, desktops, monitors, keyboards, and other peripherals, with applications covering esports, video creation, creative design, etc.

According to the official website, Thunderobot's products are targeted at the esports community.

"As a full-scene esports equipment brand, Thunderobot is committed to providing users with high-performance, high-quality, and high-value high-end esports equipment solutions, allowing every user to have the ultimate user experience." This is how Thunderobot describes its business characteristics on its official website.

During the listing inquiry process, the Beijing Stock Exchange requested Thunderobot to explain its level of dependence on the gaming industry.

"The Beijing Stock Exchange pointed out the need for the issuer to explain the degree of intersection with the gaming industry in its business model, the level of dependence on the gaming industry, whether its own business involves gaming, and future operational strategic planning." Thunderobot explained.

Thunderobot denied its dependence on the gaming industry, citing that its products are mainly sold to individual consumers through channels such as distributors and e-commerce platforms, rather than directly to companies within the gaming industry such as game developers, publishers, or operators. The company stated that it does not rely on selling to customers involved in esports-related activities, and there is no direct intersection between its sales model and the gaming industry.

Nevertheless, even after listing, Thunderobot still refers to itself as the "first stock of esports equipment on the Beijing Stock Exchange" on its official website.

With the Beijing Stock Exchange imposing restrictions on the listing of gaming companies, these companies may find their dreams of listing in the domestic market becoming increasingly distant.

Industry Judgment Challenges

From a practical perspective, it is difficult to determine which type of enterprise belongs to the medical aesthetics or gaming industry.

For example, the medical aesthetics industry can be divided into upstream companies mainly dealing with raw materials, product distributors, and downstream end medical institutions.

End medical institutions that directly face consumers and provide various types of plastic and light medical aesthetic surgeries belong to the medical aesthetics industry without dispute. However, defining the relationship between upstream companies and the medical aesthetics industry poses difficulties.

Taking Jinbo Biotechnology as an example, its core product category is recombinant type III human collagen, belonging to Class 3 medical devices. The use of collagen not only covers "wrinkle filling" in medical aesthetics but also includes auxiliary treatments for medical conditions such as dermatitis and eczema.

Therefore, based solely on the usage of the product itself, Jinbo Biotechnology cannot be directly classified as a medical aesthetics company.

Qizhi Laser faces a similar issue, with its products including quasi-molecular laser treatment machines for diseases like vitiligo, intense pulsed light therapy devices for vascular diseases (photon skin rejuvenation devices), and semiconductor laser hair removal devices.

According to the Drug Administration's official website, Qizhi Laser's intense pulsed light therapy device can be used to treat superficial benign pigment lesions and superficial benign vascular lesions, reducing excess body hair.

From a usage perspective, the intense pulsed light therapy device has effects on treating skin diseases, making it difficult to directly equate it with medical aesthetics projects like "photon skin rejuvenation."

Similar situations exist in the gaming industry as well. As the "first stock of esports equipment" on the Beijing Stock Exchange, although Thunderobot's laptops are primarily aimed at providing services to the esports community, its applications cover gaming, office work, etc., making it impossible to be strictly defined as solely a gaming industry company According to TradeWind01, the regulatory authorities currently use the target user group as one of the criteria for judgment.

During the inquiry process, the Beijing Stock Exchange requested Qizhi Laser to assess the proportion of medical beauty income based on the sales targets.

"Please explain the number of households with customer names containing 'medical beauty,' 'beauty,' or 'plastic surgery,' and the sales proportion. Whether the corresponding income is all included in the medical beauty field, if not, please explain the reasons and rationale." Beijing Stock Exchange pointed out.

Similarly, Raytheon Technology sells its products to individual consumers rather than gaming companies to distance itself from the gaming industry.

"In practice, if there are disputes, it is still necessary for project team members to communicate with the regulatory authorities on how to make further judgments," a banker in Beijing pointed out