The Research On Pricing In Seasoned Equity Offerings In China's A-Share Market

Seasoned equity offering (SEO) is one of the main ways of refinancing in capital market for listed companies. However, the investors in A-share market disesteem SEOs so greatly that the prices of nearly half issuers of SEOs fall below the issue-prices soon after the new shares come into the market because these issuers usually issue with higher price than the value per share (VPS). It will hinder the continuously healthy development of A-share market if things go on like this. Therefore, it is necessary to do some research on the causes of overpricing of SEO and find suitable countermeasures to avoid the overpricing.It is discovered that the overpricing is caused by the poor efficiency of A-share market, the action of SEO on decreasing VPS under the duality ownership structure of Chinese listed companies, some improper measures unfit for the realities of A-share market in pricing mode and investors' lack of efficient ways to estimate the VPS. The lower limit of pricing interval is often higher than the VPS of the issuers after SEO under the common effect of these four factors. And this is proved by the empirical test on the pricing interval of SEO through the Multifactor Pricing Model built in this paper.Whereas the efficiency of A-share market can't be improve greatly in the short run, it is the right way to effectively avoid overpricing of SEO at present that we should improve the improper pricing measures in SEO and perfect the Multifactor Pricing Model and use the more perfect model in pricing of SEOs. However, we should deepen reform constantly by strengthening supervision, the whole environmental construction of A-share market and the administration structure of listed companies, etc. to improve the efficiency of A-share market. Only this can we eliminate the overpricing of SEO thoroughly.