The Research On Pricing Property Of Private Securities Offerings In China

After CSRC enacted The Regulation Methods of Securities Issuance by Listed Companies in May 2006, Private Placement became the mainly mean of the SEO in recent years. During the private placement, the most important key is private placement price. Since the offer price involves the interest of new investors and old investors. This paper tries to compare offer price per share with the market price and to find out the cause of discount.Based on a great amount of related literatures and combined with the practical situations in Chinese stock exchanges, this dissertation performs empirical examinations on asymmetric information hypothesis and tunneling hypothesis. This paper thinks that different kinds of investors had different cause of the discount. The findings of this dissertation are as follows. Firstly, discount is deeper when private placement issued to big shareholder than that of issued to external investors. Secondly, when private placement issued to external investors, firms with the deepest discounts have higher costs associated in evaluating firm value. The book-to-market equity ratio is remarkably negative-related to discount. Fraction placed relative to discount is significantly positive. Thirdly, tunneling from the issuer to big shareholder through the acquirer is more likely to occur when big shareholder' ownership in the issuer is smaller than his share of ownership in the acquirer's participation in the private placement offering. Finally, when private placement issued to big shareholder and external investors, the participation of big shareholder could reduce the extent of the impact of asymmetric information. However, big shareholder also had strong incentives to engage in tunneling activity at the offering.We find evidence that discounts reflect information costs borne by external investors. When private placement issued to big shareholder, the issuers set the offering prices to benefit their controlling shareholders.