The Study Of GEM High-tech Company IPO Pricing

GEM(Growth Enterprises Market) introduction can be described as a decade sword.Pilot venture capital to establish high-tech industries from Chinese Premier Li Peng in1998, GEM was launched in2009, a whole lasted eleven years. Company listing onGEM, the IPO price is one of the most important part. From the perspective of investors,the stock price is the basis of their investment decisions; from the perspective of the issuer,the stock price does not only reflects the company’s intrinsic value, but also reflectsinvestor expectations for the company’s future. Different from the Main Board, GEMlisted companies are mainly small and medium-sized, high-tech enterprise. Thesecompanies typically have the characteristics of high-growth, high-risk, high intangibleassets proportion. Therefore, the valuation of these companies is different with the listedcompany on the Main Board.Base on the characteristics of high-tech companies listed onthe GEM, a more systematic study of the GEM high-tech company IPO valuation andpricing methods will be introduced.IPO pricing and underpricing is one of the hotest issue for the researching aboutcapital market, and there has been a large number of theoretical results. This article firstsystematic reviewed the common valuation models and the latest research article of IPOpricing. Traditional IPO valuation model includes relative valuation method, the absolutevaluation method and real options, but these valuation methods are not applicable tohigh-tech companies listed on the GEM. Through the analysis and discussion of thedefects of the method applied to the GEM high-tech company valuations, the humancapital coefficient has been introduced to construct a high-tech company IPO pricingmodel for the estimatation for institutional investors. Then this paper takes a new viewthat the intrinsic value of the stock is not equal in IPO price, and the view that in IPOprice related to the stakeholders of the game equilibrium. IPO pricing related to keystakeholders including underwriters, issuers and institutional investors, this paper appliesthe theory of asymmetric information, systematical studied the comparative advantage ofinformation among stakeholders and between different in accordance with their respectivethe comparative advantage of information on the three main acts in the IPO pricingin-depth analysis. Standing the angle to maximize the stakeholder’s interests, the offeringgoal of the underwriters is to raise the maximum amount of money; the goal of theinstitutional investors is to maximize profits in the secondary market to sell the IPO shares which were subscribed and the issuer’s goal is to let the lossing equity propotion assmall as possible. Finally, after the above theory pave the way, the clawback mechanismwas introduced to construct the pricing models when a stakeholder’s interest werebalanced, then a numerical example has been listed to show the theroy model.The conclusions of paper were given at the ending.These includes:①IPO pricing isnot only related to the intrinsic value of IPO companies, but also related to the expectedbenefits of the financing projects, distribution costs, the IPO price estimate of theinstitutional investors.②The stakeholders play a very important role in the formation ofthe final price of the IPO. The③The IPO underpricing rate is positively correlated withthe Institutional investors’ estimation of the intrinsic price of the stock. Base the aboveconclusions, some policy recommendations is given in the end of the article, in order todo some help on the existing capital markets.