Asia Tech Wire (June 11) -- A Chinese regulator has banned chip designer S2C Ltd. from applying for an IPO for 5 years due to alleged fraud.

After the bell on Tuesday, the Shanghai Stock Exchange (SSE) issued a disciplinary action against S2C, saying it won't accept its IPO application documents for 5 years.

Remarkably, this is the first time since the implementation of the registration-based IPO system in mainland China that the exchange has penalized an IPO issuer by not accepting application documents for five years.

At the end of August 2021, the SSE accepted S2C's application for an IPO and listing on the stock exchange's Science and Technology Innovation Board, also known as the STAR Market.

S2C proposed to raise 1 billion yuan in the IPO, with China International Capital Corp (CICC) as the sponsor.

In December 2021, during an on-site inspection of S2C, the China Securities Regulatory Commission (CSRC) found that the company had allegedly inflated revenues and other illegal matters.

Although S2C withdrew its IPO application in July 2022, it was still facing investigation by Chinese regulators for alleged fraudulent IPO.

In February this year, the CSRC announced the results of its investigation, saying it found that the company had fabricated material falsehoods in its public securities offering documents, and that its prospectus involved false accounts of financial data.

As a result, the regulator imposed fines totaling 16.5 million yuan on S2C and its executives.

Founded in 2004, S2C is a well-known provider of functional verification solutions for digital chip design in China.

Recent news said that S2C, which regulators have accused of fraudulent IPO, is seeking to an acquisition by a listed Chinese EDA company with more than a billion dollars in cash on its books.

However, due to the IPO fiasco, the chip design firm, which had a valuation of about 4.3 billion yuan before going public, could only go on sale at a valuation of around 2.5 billion yuan.