The Study Of The High Premium Of China GEM IPO

The establishment of the GEM was proposed in1998,after a long preparation phase, the GEM was finally launched in October2009.The main purpose to establish GEM is to provide ways for the emerging high-tech SMEs to finance. With the help of GEM, those high-tech SMEs can develop better. Meanwhile, the GEM will become a new capital market specifically for high-tech SMEs. The GEM enrich the multi-level development of China’s capital market, transform the capital market, and promote the growth of small and medium-sized innovative enterprises. It’s the decisive steps of the implementation of the national innovation. For now, GEM has covered the new energy vehicles, high-end equipment manufacturing, biotechnology, new energy, energy saving, new generation of IT, new materials, such as the seven strategic emerging industries. The GEM provide funding for independent innovation and hi-tech SMEs, and help to address the small and medium-sized innovative enterprises’financing problem. It contributes to an innovative country and sustainable economic development. Also, the GEM has long been criticized for the "three high", that is high issue price, high price-earnings ratio, superb raised the issue.The GEM listed companies’IPO premium is not entirely reflect its high-growth ability, but with a clear bubble composition and speculative factors. The foam composition and speculative factors in the high premium represent that the GEM is not a completely effective capital market. Under the premise that our capital market is not fully effective, we can’t solely rely on the market to completely protect the reasonable pricing of the GEM IPO. We need to strengthen the institution building to make up the defect of GEM’s IPO pricing problem. The idea of establishing the business growth evaluation system in this paper is expected by the growth evaluation to improve the breadth and depth of market information. The growth evaluation information provide fundamental value base for the Securities and Futures Commission and the issuance examination committee to reasonable constraint GEM IPO pricing and prove the GEM listing qualifications. And then effectively curb the behavior of the enterprise "packaging listing". The evaluation information can also provide investors with business growth information, enable investors to be more comprehensive and in-depth understand of enterprise development, moreover, promote the rational pricing of the GEM stocks, and guide investors to make reasonable investment. The most important effect is to promote the development of China’s capital market, and improve the effectiveness of China’s capital market.At the very beginning, this paper studies the high premium of companies listed on GEM IPO, and then analysis the rationality of this phenomenon. By concrete analysis of the rationality factors as well as non-rational factors of the high premium, we can have an overall judgment of the GEM IPO high premium.The analysis shows that the high premium does not represent its high-growth ability, but with a clear bubble composition and speculative factors. The foam composition and speculative factors in the high premium proves the non-validity of China’s capital market. So under this condition, solely rely on the market can not fully protect the reasonable pricing of the GEM. Because of the negative impact of the GEM IPO problem, we believe we need to strengthen the institution building of the GEM IPO. So in this paper next three parts, we discuss the GEM IPO institution building. The first part is the feasibility analysis about the business growth evaluation system on the GEM IPO aspects. The second part is the basic idea of business growth evaluation system. The third part of is about the safeguards to implement the evaluation system.This paper closely around the center that the business growth evaluation system on the GEM IPO aspects. At the beginning, we discuss the high premium of GEM enterprise IPO, and then study the GEM companies growth evaluation system on the IPO aspect. The growth evaluation system proposed in this paper ensure that the majority of investors in the market have a comprehensive and objective understanding of the company’s future ability to grow and provide a solid basis for a reasonable investment, thereby enhancing our GEM’s effectiveness and curbing the phenomenon of the GEM IPO premium.