Han Jintong, 56, a retail stock investor in Shanghai, has been selling shares of some loss-making companies of late. He owned them for years, but the decision to sell was driven by the realization that the companies have slim chances now to become shell entities.

Shell companies are those that are already listed but do not actively engage in business. They instead wait to get bought by private companies wishing to get listed. The latter do such deals to skip the time-consuming procedure and attendant approvals for initial public offerings. This process is called a reverse merger or backdoor listing.

But the imminent registration-based IPO system promises to be simple and fast, and will likely sound the death knell for backdoor listing.

"I used to think that share prices of these companies would surge once some private companies use them as shells for backdoor listing. But now, I feel it's too risky to hold them. Registration-based IPO will be introduced soon, so the value of shells will plunge," said Han.

He is not alone among investors who are worried over resumption of IPOs after a five-month-long suspension.

Registration-based IPO system may make backdoor listing unnecessary, said analyst Chen Jiahe from Cinda Securities Ltd.

Registration-based IPOs, one of the biggest forms of fund-raising in China's stock market, are expected to be launched as early as the first half of 2016. The legal procedure is gaining momentum and the country's top legislature will likely approve it by the end of this year, so that the CSRC could implement the mechanism, said experts.

According to a research note by Liu Chenjie, an analyst with Beijing Gao Hua Securities Company Ltd, potential measures under the new system include deregulation of IPOs first and their pricing later.

The 13th Five-Year Plan (2016-2020) envisages that the proportion of direct financing be gradually increased.

Other analysts said that as China's equity market is anticipated to become increasingly capital-driven and liberalized under the registration-based IPO system, the value of shells will decrease gradually.

It will become increasingly risky for investors to hold shares of such potential shells, most of which are loss-making companies.

But there was a time when small investors such as Fang Meiyuan, 56, would get lucky, or rich, through shells. He bought shares in Chongqing New Century Cruise Co, a Shenzhen-listed company that operates river boat tours. It lost 16 million yuan in the 12 months to September. Fang had bought the shares at some 32 yuan apiece.

Now, the price has surged to more than 220 yuan, after the company agreed to be taken over by Shanghai Giant Network Technology Co as part of its backdoor listing.

Not so lucky as Fang is Li Qingmei, 53, another small investor. Li said she heard Focus Media sought to get backdoor listing via a reverse merger with Shenzhen-listed Jiangsu Hongda New Material Co Ltd. So, she bought Hongda shares, which crashed later.

"It feels like gambling if investors bet their funds on potential shells. If you get it right, the quick, event-driven profits come, but if you get it wrong, then you might lose a big sum. That's exactly why we encourage our clients to follow the buy-and-hold strategy and do value investment instead of short-term speculation," said Zhang Zhiyuan, analyst with Shanghai-based Fangda Asset Management Ltd.