The Gem Ipo Pricing Mechanism Research In China

On october 30,2009, our country’s GEM had been established inshenzhen after ten years’s preparation with the first batch of 28 newshares listed and trading on it..Many problem had been exposed during twoyears runing,such as high IPO PE,Price and Raising fund ratio appearedfrequently,many riches have been created by IPOs,executive resignationwith shares transferred to money but performance of listed companydeclined severely.under this background, this article focus on the issueand pricing mechanism of GEM.Generally,IPO pricing undergoes twosteps:using the exsiting model evalute the theoretical value and thenintroduced most suitable pricing dicovery mechanism to confirm the finalissue price with market demand situation into consideration.In view of most listing companies in GEM engaged in high-techindustry which possess high risk and high growth characters,the traditionvalue model should be modified and real option model should be appliedbecause the values of intangible asset and patent right are sometimesdifficult to evaluate.In the part of IPO issue mechanism,firstlyelaborated the major international issue mechanism and analysed thedifferece between our presently adopted mechanism and majorones.Meanwhile,the implementation effect of our country’s hybridmechanism on major board,medium-small board and GEM had been test atcontrast.In view of the high PE issue,through single factor statisticaldescription and multi-factor regression analysis, combined the macroeconomic factor, the company internal factor as well as issue factor,theresult indicated that the GEM PE had a whole overestimaton, the professionfactor and issue factor had no great influence to the PE,the companyinternal factor(profitabilty varibales and growth variable)andmacroeconomic factor(non-risk interst rate,shanghai composite index andindex PE)explained the majority of IPO PE.Regarding the pricing efficiency of IPO,many research adopted thelevel of underpricing ratio. Under the foundation of predecessorstudies,this paper pointed out our country IPO market is special and therational based research conclusion cannot explain our major board highunderpricing ratio.In view of our GEM IPO underpricing ratio,although the underpricing ratio is relatively lower than past time,there is a longdistance to the relatively reasonable level.After the controlledvariables and mood variables are introduced into the model,we discoveredthe mood variables still dominate the non-rational behavior on the firstlisting day,which shows under the verification system secondary marketpotential demand and neterogeny faith are the primary reason fornon-rational behavior. Finallly,we put poward three proposal for furthermarkteability reform of our country IPO offering and pricing mechanism.