Ipo Pricing In The Multivariate Model, The A-share

IPO is the critical step of a private firm become public. The pricing is the critical part of an IPO. Accurate pricing will affect not only the interest of issuer, investor and underwriter, but also the resource allocation efficiency of the capital market.One of the primary standard of deciding the extent of accuracy is that the difference between the IPO price and the expected secondary market price. The major underwriter must appraise the market value of the new issue as the basis of investment decision making process.Because of the immature capital market, the IPO pricing process of Chinese A share market is much less scientific and standardized. The pricing models such as discount cash flow and economic value added are not very feasible. For many years, the price/earning model had become the predominated pricing method, causing seriously IPO pricing discount.This research is focusing on the shanghai security market after the adoption of Authorized Practice;applying factors analysis on the public disclosed information of 111 IPO companies between 2001/04 and 2003/02; using stepwise regression analysis to determinate factors affecting IPO pricing, and reconstruct these factor on a quantitative basis; and establishing a multi-factors IPO pricing model.This research indicate that IPO pricing is the result of multiple factors. Some important factors that affecting sample companies IPO pricing include: company financial strength and operational feature indices, number of new shares issued, and industry characteristic. At the mean time, the changing market structure and market focus will cause changing IPO pricing factor. This model had indicated the factors affecting IPO pricing, and proved the shortcomings of single administrative pricing method. The Multi-factors IPO pricing model of this research had greatly reduced the tacking error between IPO price and market price, closely simulated the marketable pricing process, proved to be feasible on the actual application, and established a foundation for further improvement.