China's Gem Market Ipo, Pricing Mechanism Studies

October30,2009, the GEM market in China officially run and has gone through more than two years. On December31,2011, there were281companies listed on GEM in China. GEM is an important part of our multi-level capital market and is an important financing platform for SMEs in China. People had high hopes for the GEM initially because of decades of expecting, but gradually disappointed in its actual operation. With the post-break and part of the fund announcing to suspend participation in new share issue inquiry, more and more sectors of the community calls for reforming the current distribution system of the GEM in China.With GEM running the second anniversary, this paper selects IPO Selling Mechanism of China's GEM for the study, hoping to find the problems of the current IPO Selling Mechanism of China's GEM and propose appropriate countermeasures. At first, this paper reviews China's stock distribution system and the historical changes of the pricing mechanism. Next, there is analysis of the current distribution pricing system of China's GEM, comparing with other overseas GEMs. Then, this paper analyzes the current situation and existing problems of China's GEM. Finally, three points are made for the IPO reform.The research finds that the current IPO Selling Mechanism of the GEM system is only single stock market-based inquiry system. Listing resources is in short supply and there is direct investment and brokerage associated with the interests of the inquiry out of high issue price. In this case, the listed companies can get a lot of money while others are waiting for craving. At the end of this paper, the author proposes the following suggestion. First, separate the supervision and auditing of the GEM IPO. The SFC may give the right to the stock exchange to release the number of listed. Second, increase the responsibility of the underwriter and sponsor representatives. Third, learn from international practice and introduce the Dutch auction system to increase the cost of the inquiry. Also, improve the existing price-earnings ratio valuation method and can introduce Price/Earnings to Growth ratio in order to test whether the new share issue price-earnings ratio is reasonable.