As we step into the depths of winter, the market for private placement funds is witnessing the potential for sparks of renewed interestRecent trends indicate that dim market conditions have caused a considerable downturn not only in the enthusiasm of listed companies to engage in private placement activities, but also in the public funds’ participation levelParticularly evident in the latter half of the year, the total subscription amount across all fund products from the beginning of the third quarter up until now has plummeted to approximately 857 million yuan, which is a staggering drop of nearly 90% compared to the previous year.

However, following the end of September and a rebound in the A-share market, several listed companies that initiated private placements earlier in the year saw their stock prices surge significantlyInvestors who entered these placements at a discount are now enjoying considerable unrealized gains

For instance, Changliang Technology, known for its financial IT services, experienced a dramatic stock price hike from around 7 yuan just two months ago to nearly 18 yuan nowWith an issued price for private placement at merely 5.7 yuan per share, funds that participated have seen their returns exceed 200%. Other companies, such as Chuanrun Co., Shiyun Circuit, and Changying Precision, also reported similar doubling profits from their private placements.

The cooling enthusiasm for public participation in private placements has been notableRecently, Jingjiawei announced plans to issue 63.99 million A-shares at a price of 59.91 yuan per share, aiming to raise approximately 3.833 billion yuan, netting nearly 3.827 billion yuan after necessary costsSubscription was made by a number of public fund products, including those from Huaxia Fund, Jianxin Fund, and Caitong FundNotably, the Guotai CES Semiconductor ETF acquired 500,000 shares of Jingjiawei with a total cost of 30 million yuan, while Huaxia Panrun’s two-year fund had a subscription cost of 8.5 million yuan, taking up about 4.95% of the fund's net asset value.

As we transitioned into the latter part of the year, public fund participation in private placements has continued to mirror the lackluster trends of the first half

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By the cut-off date for private placements this past quarter, all fund products collectively contributed only 857 million yuan, which is sharply down from 8.112 billion yuan in the same period last yearThe average subscription amount per product has also declined from 21.57 million yuan to just 15 million yuan.

Moreover, due to previously dismal stock price performances, listed companies have been cautious in their fundraising effortsUnlike past practices where scale reached into the hundred billion range, in 2024, only Sinopec managed to raise 12 billion yuan, while other projects fell shy of 5 billionCompanies like Keming Foods and Puyuan Precision Electronics even reported fundraising revenue of less than 10 million yuan.

The market's sudden rebound in September rekindled interest in listed companies' refinancing through private placementsFor example, Jingjiawei's net raised amount currently ranks as the third-highest for the year

A public fund expert noted that as trading volumes increase and investor sentiment improves, the difficulty of issuing private placements appears to be decreasing.

The Huaxia Panrun’s two-year report indicated that despite the low number of project issuances and financing amounts in the private placement market this year, which have maintained reasonable discount levels, there is a hopeful outlook for a resurgence in project numbers and financing scales as market conditions stabilize.

The enthusiasm has visibly improved as the market picked up, with many companies witnessing a substantial rise in their stock pricesBy November 9, projects such as Changliang Technology and Chuanrun Cohad already achieved substantial returnsTo exemplify, Changliang Technology's stock, after being a rallying point for the financial technology sector, spiked, and private placements from earlier facilitated even greater profitability with stakes rising significantly.

As of the end of the third quarter, the market value of Changliang Technology's holdings within its largest fund soared to 7.57% net value ratio, making it the fund's top holding

By November's start, the persistent growth in its stock price, together with a remarkable share price increase since September, contributed to an overall fund rise of over 40%, marking a peak not seen in over two years.

It's noteworthy that some funds previously engaged in private placements have opted not to hold long-term post-unlockingFor instance, in October of last year, Jinfu Technology disclosed a private placement raising 738 million yuan at 3.6 yuan per share, with the Guotai Jinpeng Blue Chip Value Fund participating with 2 million yuanThe stock was locked until May this year; however, reports from the half-year marks show the stock was exited from the holding list, implying the fund manager decided to sell it in early trade at around 3-4 yuan per share, even as it surged to as high as 6.94 yuan later in the month, resulting in a lost opportunity for the ensuing rebound.

In addition, Caitong Dingxin's quantitative selection fund through its 18-month program became one of the top ten shareholders of Capital Online through a private placement initially in February

Shares were lifted up considerably and subsequently unlocked in late SeptemberNonetheless, by the end of the third quarter, it disappeared from the top ten heavy stocks, indicating the fund manager chose to reduce holdings during a significant price surge.

Despite these complexities, the term “patient capital” is becoming increasingly prominent in financial discussionsAccording to Wang Hai, the deputy general manager of Caitong Fund, patient capital differs from its non-patient counterpart by focusing on long-term returns and exhibiting resilience to market fluctuations while maintaining a keen interest in the broader social impact of investments.

He emphasized that the development of diversifying mechanisms for patient capital extends beyond just the primary market but is also applicable to secondary and private placement marketsThe current preference within investment circles is gravitating towards areas such as mergers and acquisitions, especially in enhancing resource allocation and promoting industrial consolidation and efficiency.

This ongoing trend suggests that the private placement investment landscape is ripe with opportunities, as mergers and related financing projects continue to flood the market, offering ample high-quality project options for investors across various market corridors.