Research About The Ways Of Private Placement And Tunneling Of Major Stockholder

Private placement with low release conditions, simple procedures, flexible pricing, etc., has increasingly become an important means of equity capital markets for refinancing since the shareholder structure reform in 2006. Through private placement, listed companies can introduce high-quality assets, make integration of resources, introduce strategic investors, complete holistic listing and so on. However, due to the release conditions are relatively relaxed, and our current policies and institutions for the private placement is not perfect, it has become a more common phenomenon that shareholders who have control rights in the use of private placement to convey interests, which seriously damaged and eroded the interests of minority shareholders.This paper takes the theory of equity refinancing and control theory of private benefits as the basis, based on a systematic summary of the domestic and foreign research results, list Jiantou Energy(000600) as an example, systematically analyzes how large shareholders conduct tunneling behavior in the process of private placement.This paper introduces three kinds of benefit transportation ways in the private transportation, namely low price issue, injection of inferior assets and injection of overvalued assets. The four kinds of interests conveying ways have been reflected in this case and this paper makes a detailed analysis of them. Firstly, as to the pricing benchmark day options, the large shareholders had three choice: the date of the announcement of the board resolutions, the date of the announcement of the shareholders meeting resolutions, the date of new shares issue, but the large shareholders selected the the date of the announcement of the board resolutions which the stock price of the day was lowest, and determined the issue price on this basis. In addition, when we observe the stock price trend of Jiantou Energy in the long term, the company chose a time that their stock price was in historic lows. Secondly, one of the injection assets "Xuanhua Power" had showed deficits for two years before the private placement, that means " Xuanhua Power" was not excellent assets. Finally, as to the "Cangdong Power", the results of income approach is 86.05% higher than the results of asset based method, but the company chose to use the income approach to determine the price of "Xuanhua Power". The listed companies transfer benefits to large shareholders.There are already many scholars have been studied the private placement and a large shareholder tunneling methods, but most use empirical analysis, and the study only focused on the a particular form of tunneling. Based on the case study, you can look the private placement with a comprehensive perspective, and have a more complete understanding about the methods of tunneling. This paper puts forward some suggestions to improve the private placement from five aspects. Fistly, listed companies should perfect their corporate governance. Secondly, the pricing mechanism should be improved. Thirdly, strengthen the assessment quality of the injected assets. Fourthly, strengthen release supervision and standardize information disclosure. Finally, establish and improve the protection mechanisms for the interest of small investors.