A Study On IPO Valuation And Under-pricing Of GEM In China

With gradually standardize of the GEM(Growth Enterprise Market), moreSME(small and medium-sized enterprises) and EM(emerging enterprises) probablypursue public financing.Most of the company that listed in GEM are engaged inhigh-tech business,these companys in one hand are small, performance are lessprominent and didn’t have a long history,but in other hand they have high growthpotential and large room for development.The main purposes of develop of the GEMare to provide more convenient channels of financing and create a normal exitmechanism for VC(venture capital),in the mean time,this is an important mean for chinato adjust its industrial structure and carry out economic reform. How to accuratelyreflect enterprises’s actual value and set a more reasonable price for IPO have now takein mind of majority of managers and investors.China’s economy is undergoing transition,its capital market mechanism is far lesscomplete than developed countries, especially regard to the IPO pricing,thereout theunderpricing of the IPO problem has long plagued the stock market’s stability anddevelopment.Therefore studing China’s GEM listed companies’S IPO pricing andunderpricing problem plays a key role in a long-term and stable development of China’scapital market.This paper first describes the research background and significance,review thedomestic and foreign research situation of real options theory and IPO underpricingproblem, analyze china’s GEM, describe the development of the GEM, differencebetween GEM and Main Board,as well as position and develop prospect ofGEM.Introduce the factors that affect corporate value and traditional IPO pricing modeland give the IPO pricing model based on the compound option.At last,analyse theimpact factor of the GEM’s IPO underpricing problem in quantitative and qualitativeways, get the main conclusion and give some relevant policy recommendations.