Siyi Technology IPO Under Scrutiny: Controversy Over Massive Fundraising Despite Ample Cash Reserves

Introduction: Strong Performance Cannot Mask Deeper Concerns

As a major player in China's electronic measurement instrument sector, Siyi Technology has achieved impressive revenue growth in recent years, with its IPO process advancing steadily. However, behind the glossy financial figures, multiple operational risks are coming to light simultaneously. A deeply intertwined procurement and sales relationship with majority shareholder China Electronics Technology Group Corporation (CETC), combined with 1.6 billion yuan in cash sitting on the books while still seeking to raise massive IPO funds to "supplement working capital" — these issues have triggered strong market skepticism about the legitimacy of its listing.

Two-Way Procurement and Sales Lock-In: CETC's Shadow Looms Everywhere

The scale of related-party transactions between Siyi Technology and its controlling shareholder CETC is one of the most closely watched focal points in this IPO review.

During the reporting period, CETC and its subsidiaries appeared frequently on Siyi Technology's lists of major customers and suppliers, forming a pronounced "two-way procurement and sales lock-in" structure. On the sales side, revenue derived from within the CETC system has consistently remained at elevated levels. On the procurement side, certain core raw materials and components are likewise sourced from entities within the group. This deep interdependence raises a pressing question: does Siyi Technology's market competitiveness stem from the strength of its own products, or from an internal circulation loop facilitated by its majority shareholder?

Business independence is a top priority for regulators reviewing IPO applications from state-owned enterprise (SOE) subsidiaries. If a company's revenue and procurement are both heavily reliant on the same controlling shareholder system, the authenticity and sustainability of its financial data are significantly undermined. Should CETC adjust its internal procurement strategies or resource allocation priorities, considerable uncertainty surrounds whether Siyi Technology could maintain its current growth trajectory.

1.6 Billion Yuan in Cash on Hand — Why Still Raise Funds to 'Supplement Working Capital'?

Even more puzzling to investors than the business independence question is the design of Siyi Technology's fundraising plan.

According to its prospectus, Siyi Technology holds approximately 1.6 billion yuan in monetary funds on its balance sheet — a substantial cash reserve. Yet the company has still earmarked a significant portion of its IPO proceeds for "supplementing working capital." This move has sparked widespread controversy in capital markets — why would a company with healthy cash flows and ample funds on its books need to issue public shares to raise money for routine operations?

From a financial logic standpoint, supplementing working capital is typically a reasonable choice when a company faces tight operating cash flows or significant capital expenditures. For Siyi Technology, however, 1.6 billion yuan in cash reserves is more than sufficient to cover its day-to-day operational needs. Allocating large amounts of raised capital to supplement working capital not only carries the appearance of a cash grab but could also lead to inefficient use of funds, ultimately harming the interests of small and mid-sized investors.

Market analysts note that such fundraising arrangements are not uncommon among recent IPO projects, but regulatory scrutiny of this practice is intensifying. The China Securities Regulatory Commission (CSRC) has on multiple occasions issued feedback on projects with insufficiently justified fundraising plans, requiring issuers to thoroughly demonstrate the necessity of their capital requirements.

The R&D Efficiency Question: Can the Input-Output Ratio Withstand Scrutiny?

The electronic measurement instrument industry is a quintessentially technology-intensive field, where R&D capability is the fundamental pillar of a company's core competitiveness. Siyi Technology's prospectus also places heavy emphasis on its technological accumulation and R&D investment.

However, when examined through the lens of R&D efficiency, whether Siyi Technology's performance truly matches its industry standing still warrants a question mark. During the reporting period, although the company's R&D expenditure continued to grow, the conversion efficiency of R&D outcomes, the degree of commercial application of core technologies, and the technological gap with international leaders such as Keysight Technologies and Rohde & Schwarz are all dimensions that investors should scrutinize closely.

Against the broader backdrop of accelerating domestic substitution, the electronic measurement instrument sector is indeed experiencing a historic window of opportunity. But policy dividends cannot substitute for genuine technological breakthroughs. If R&D investment fails to translate efficiently into market-competitive products, short-term performance growth will ultimately prove unsustainable.

Industry Perspective: Common Challenges Facing SOE Subsidiary IPOs

The issues confronting Siyi Technology are not unique but rather represent common challenges that pervade the process of SOE subsidiary spin-offs and listings. Excessively high related-party transaction ratios, insufficient business independence, and questionable fundraising necessity — these problems have surfaced repeatedly in IPO reviews of multiple SOE subsidiaries in recent years.

Regulators are adopting an increasingly stringent stance on such issues. Since 2023, the CSRC has explicitly stated that it will apply stricter scrutiny to IPO projects with high proportions of related-party transactions and has required issuers to substantively enhance business independence and reduce reliance on controlling shareholders. Under this regulatory direction, whether Siyi Technology can successfully pass its review remains an open question.

Outlook: A Long Road Ahead for the IPO

Objectively speaking, Siyi Technology does possess a solid technological foundation and market position in China's electronic measurement instrument sector, and its industry benefits from favorable policies around domestic substitution and new infrastructure development. However, going public is not an end in itself but rather the starting point for achieving higher-quality development.

For Siyi Technology, the most urgent priority is to substantively address market concerns: further reducing the proportion of related-party transactions with the CETC system and strengthening business independence; reasonably adjusting its fundraising plan and thoroughly justifying the necessity and efficiency of fund utilization; and demonstrating to investors in a more transparent manner the conversion pathway and commercialization prospects of its R&D achievements.

Only by confronting and resolving these issues head-on can Siyi Technology's IPO journey proceed on more solid footing — and only then can it truly earn the long-term trust of the capital markets.