The Research On Mode Selection And Economic Consequence Of Private Placement Of Listed Company

After the share structure split reform, private placement becomes popular. Private placement,allotment of shares and public offering become the main refinancing methods of listed companies in our country. Although the scholars in our country have been researching in the new financing way, for listed companies, regulators and investors, private placement is relatively a new thing. The short-term and long-term effect of private placement remains to be seen and analyzed. Therefore, it has theoretical and practical significance to study what the impact is the private placement have on listed companies.This paper adopts the method of case study. The object of this case study is ShanXi Coal International Energy CO.,LTD. I compare the two private placement made by the company from aspects such as the background and purpose, the choice of price setting, assets evaluation, the profit distribution policy, the market performance and financial performance. First of all, I review the articles on discount of private placement, announcement effect,long-term performance,big shareholder’s support or tunneling.And I find out the related theory to support the research of this article. Secondly, I analyze the present situation of refinancing and the private placement in China. By comparing the issue conditions of private placement,allotment of shares and public offering,I want to find the reason why the private placement is so popular.Then, I talk about the background and process of ShanXi Coal International Energy CO.,LTD.’s two private placement in detail. On this basis, I analyze the relationship between the private placement mode and its performance to prove that different purpose of private placement have different impact on company’s short-term and long-term performance. Finally, I give some reasonable suggestions to majority of investors and regulators on private placement.This study finds that: Firstly, the first private placement, subscribed by the big shareholder in 2009, is in compliance and it finally improves the performance of the company. I think it is probably due to the reason that the company want to win the recognition and access to the capital market under the background of the economic depression. At the same time, the major shareholder’s share increases to 75.9%, which paves the way for interests transfer. In the second private placement, institutional investors, company management and major shareholders have the suspicion of conspiracy. The three parties form a chain of the indemnification: firstly, the big shareholder put inflated assets into the company; secondly, the company management lowers the purchase price to attract institutional investors to consider financing the shares; thirdly, the company’s management uses money raised to buy the big shareholder’s assets. This affair finally has a negative impact on corporate performance. By comparing the motivation and economic consequences of the two private placement, I think that we need to pay more attention to the private fund-raising purpose to prevent the indemnification of private placement.