147

Harvard Business Case Oriental Fortune Capital: Building a Better Stock Exchange – The Case of ChiNext, the Shenzhen Junior Market

Case Researcher

149

N9-811-105

This case explores what is arguably one of the most successful efforts to promote the development of a public market for entrepreneurial firms over the past decade.

As you read the case, please consider the following questions:

1. Why has the Chinese IPO market been so hot at the time when IPOs have been so slow at most places in the world?

2. Why have ChiNext tried to have strong listing requirements? Have they focused on the right requirements?

3. How does the competition between the Shenzhen and Shanghai exchanges affect ChiNext?

4. How has the Chinese market changed? What are the implications for how ChiNext’s should adjust?

5. What can Western policymakers learn from the Chinese experience?

Josh Lerner

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Listed companies 505 536 544 579 670 740 830 1,169

Market capitalization (RMB billion)

1,265 1,104 933 1,779 5,730 2,411 5,928 8,641

Total volume (RMB billion)

1,215 1,642 1,327 3,873 18,764 9,938 19,873 24,742

Daily average volume (RMB million)

5,042 6,757 5,485 16,073 77,539 40,401 81,448 102,242

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Listed companies 505 536 544 579 670 740 830 1,169

Market capitalization (RMB billion)

1,265 1,104 933 1,779 5,730 2,411 5,928 8,641

Total volume (RMB billion)

1,215 1,642 1,327 3,873 18,764 9,938 19,873 24,742

Daily average volume (RMB million)

5,042 6,757 5,485 16,073 77,539 40,401 81,448 102,242

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169

Li

quid

ity

requ

irem

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Shar

ehol

ders

Sp

read

20

0 NA

10

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0 40

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50

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Publ

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held

sh

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25

% o

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tal;

10%

if

capi

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US$

61m

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of i

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30

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OR

10%

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of i

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Mar

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US$3

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US$8

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Stoc

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Fina

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US$1

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OR

Aggr

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US$4

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for

last

3 y

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; AN

D

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US$6

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s; A

ND

US

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) ; OR

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Ord

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ofit

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Cash

flow

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Ag

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mn

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yea

rs; O

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US$7

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net

pro

fits

of

US$0

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owth

for

last

2 y

ear)

Aggr

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6mn

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B300

mn)

for

last

3 y

ears

NA

US$6

4mn

last

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ket c

ap

> US

$512

mn

(2)

NA

NA

NA

NA

170

22

171

22

23

172

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1 Shenzhen Capital Group Co., Ltd. Domestic 2 Sequoia Capital China Foreign 3 IDG Capital Partners Foreign 4 SAIF Partners Foreign 5 Shenzhen Fortune Venture Capital Co., Ltd. Domestic 6 Jiangsu Govtor Capital Group Domestic 7 Shanghai NewMargin Ventures Domestic 8 China Science and Merchants Capital Management Limited Domestic 9 Shenzhen Co-win Venture Capital Investment Limited Domestic 10 Legend Capital Domestic 11 Green Pine Capital Partners Co. Domestic 12 CDH Venture Ltd. Foreign 13 Shenzhen Oriental Fortune Capital Co., Ltd. Domestic 14 GGV Capital Foreign 15 SIG Asia Investment, LLLP Foreign 16 Intel Capital Corporation Foreign 17 Softbank China Venture Capital Foreign 18 Kleiner Perkins Caufield & Byers - China Foreign 19 DT Capital Partners Foreign 20 Walden International Foreign

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