Analysis On The Factors Of IPO Valuation On China's GEM

After nearly ten years'preparation and test, China growth enterprise market opened in Oct, 2009 in Shenzhen exchange stock market. Among the first bunch of firms that applied, there are 28 firms which passed CSRC's approval and successfully got listed on GEM. GEM's position is different from that of main board, since these listed firms have the features of high proportion of intangible assets, high growth potential, unstable operations and small scales, which cannot get listed on the main board. On one hand, GEM provides the platform for those firms to get financing and capitalists to get exit; on the other hand, it can gather social unused funds to promote the development of capital market and asset utilization.IPO valuation is essential part of the IPO process, both to the firms and investors. There are a number of valuation methods; however it is not easy to find the most suitable one for China GEM, considering its short time of existence and comparability. At the same time, we have to consider the interaction between underwriters, investors, regulators. Currently the GEM's pricing is much higher than that of main board, and it is not well developed in systems. It is necessary to figure out those factors that have great impact on its pricing and compare it with that of main board and overseas growth enterprise markets.This paper systematically combined previous studies and based on China's GEM current situations and comparison with different valuation methods and understanding the interaction, has analyzed and chosen a number of factors, and come up with a multi-factor model for China's GEM. This valuation model may provide guidance to investors'investment and GEM's reasonable pricing mechanism. This is significant both in theory and reality.