The Study Of IPO Valuation Bubble And Its Consequences

Regulators relaxed IPO P/E ratio grip during since 2009, and produced a large number of “ High issue price,High P/E ratio, Super raise funds” IPO stock.we call them “three highs”, especially in the GEM market. And then many stock fall below their initial offering price, bring vast consequences for investor and others. There is much dispute on the reform.This paper is case research type, it choose Walvax Biotechnology IPO case to do analysis, which is “three highs”typical model.First, the article introduce IPO ruler changes and the age background of Walvax listing. The paper also introduce its organization structure, product, competitors, and the basic situation of Walvax IPOSecond, the paper use PE, PB, PEG value assessment method to confirm its issuing price valuation reasonability.Third, we want to find its real financial quality through analyzing its receivables, funding liquidity, stock, security surplus cash multiples(SSCM). And the paper analyse its product growth potential, R & D ability, marketing capacity to find its development potential. We want to find if Walvax real ability to match its high price and high P/E ratio.Fourth, the paper analyse quality of information disclosures in its IPO process. All of these will exert an effect on IPO price.Fifth,the paper analyse the situation after IPO, include the use of super raise funds, and introduce the listed company, underwriters,listed company management, nstitutional investors, retail investor playing what kind of role in this IPO case. The old shareholders raise price, because they can get benefit from it.Sixth, the paper introduce some American stock ruler which can help reduce IPO PE ratio. This paper also discusses the systems adjustment of IPO and its effect. And the changes we will face after registration system full implementation in the future.The analysis maybe provide some reference, which can help investor to choose suitable stock. the regulators also can get reference in issuing new shares.