Research On Tunneling In Private Placement

Since the split share structure reform,China’s enterprises that have been refinanced through private placements have been increasing.Compared with other equity refinancing methods,private placement has many advantages such as fewer issuing procedures,lower costs,and flexible distribution methods,so it is favored by listed companies..However,due to the insufficiency of China’s capital market system and the incomplete regulation of the private placement process,the process of private placement of listed companies is often accompanied by the question of interest transfer.When a listed company makes a non-public offering of shares to major shareholders or related parties,it is easy to generate interest transfer problems.The transfer of interests of listed companies has been reflected in the process of private placement,mainly including controlling the issue price by manipulating the stock price before the private placement,and injecting non-performing assets through debt restructuring in the process of private placement.After the private placement,the major shareholder transfers the company’s wealth through high profit distribution and related transactions.The behavior of listed companies in the private placement of large shareholders will not only harm the interests of small and medium shareholders,but also the development of the company itself.The specific performance is that the company’s performance has not been significantly improved or even declined after the private placement.This paper gives a detailed introduction to the three private placement process of Zhongfu Industry.Analyze and judge whether the private placement process involves interest transfer.Through the case analysis of Zhongfu Co,the relationship between private placement and interest transfer is as follows: In the private placement,the listed company sells the company’s shares to major shareholders and related parties at a low price mainly by manipulating the issue price.Major shareholders and related parties buying a large proportion of the listed company’s equity at a low price in the private placement,the company’s control is further obtained;after the private placement,the major shareholder and related parties control the company’s follow-up operations because of their control right,and in the following operation,major shareholders and related parties transfer the interests for personal gain through the related transactions,excess profit distribution and other artifice.In addition,the major shareholder obtains the shares of the listed company at a low price in the private placement,and then chooses the right time to reduce the shares and obtain a high interest spread.In addition,this paper is based on the financial data of Zhongfu Industry after a period of private placement,to explore the impact of private placement on Zhongfu Industry: whether the benefit transmission damages the company’s interests or the effective financing of the enterprise achieves synergy.The newly revised “Regulations on Non-public Issuance of Stocks” in 2017 has made clearer regulations on the implementation of private placements,which has a greater impact on the implementation of private placements.This paper combines case studies to analyze the impact of new regulations on private placements.It is concluded that the new regulations have a significant inhibitory effect on the problem of interest transfer in private placement.This paper analyzes the new rules and cases and draws the following conclusions: T In the new regulations,through the clarification of the non-public offering of stock pricing benchmark days,as well as the size and frequency of issuance and the review of financial investments,listed companies can no longer transfer benefits to major shareholders and related parties by controlling the issue price.At the same time,the phenomenon of frequent financing and over-funding by listed companies is controlled.A listed company cannot arbitrarily finance according to its own interests.Then the free cash flow obtained by the listed company through the private placement is less likely to become a large amount of idle funds,and the motivation for the large shareholders to transfer the benefits is weakened.Through the research on the problem of interest transfer in the private placement of case companies,this paper gives some specific policy recommendations,in order to provide some reference for the relevant departments to further improve the private placement system.