Research On The Performance Of Backdoor Listing Of Hailan Home

Backdoor listing is a special way of going public by merging with a shell company. Due to the stringency of IPO audit standards and the triviality of IPO approval process, many enterprises with financial demand turn to backdoor listing. There has been the boom of backdoor listing in China since1997. And IPO has suspended at times ever since. In the meantime, the delisting system leads to the emergence of “shell resource”. All these factors play important roles on the development of backdoor listing. Backdoor listing is an effective way for enterprises to broaden their financing platform and get the listing qualifications. Meanwhile it helps avoid the risk of suspension of listed companies and achieve the breakthrough development for them. In this way, backdoor listing brings more social benefits by optimizing the distribution of social resources. Backdoor listing is easier to succeed compared with IPO. However, there are lots of unsuccessful backdoor listings, or although going public smoothly, they are bothered by the problems left over by the “shell company”, such as the assets gap or earnings hole. In the specific operation process of backdoor listing, there are many key points of trade, such as designing the trading scheme, price assessment for the buyer, the performance evaluation which are all great questions worth in-depth studying and research.This paper selects the backdoor listing of Hailan Home. From the perspective of financial and through valuation of Hailan Home, research on market effects and financial performance, and analysis of the motivation of merging with a solid shell and its financial effects, draw relevant conclusions and recommendations. Firstly define and introduce the relevant concepts, theories and methods to lay the theoretical foundation for the case analysis; Then introduce the backdoor listing of Hailan Home, focusing on the valuation of the buyer, the market effects and financial performance, the pattern of merging with a solid shell and its effects on financial performance : Determine the reasonableness of the valuation results from parameter estimation and data forecast. Reflect the increasing of the value of shareholder wealth from the estimation of the two stage equity appreciation rate. See the split of shareholder’s interests from the compensation package. Evaluate the financial performance from variation of accounting indicators and market performance. Then research on the motivation of merging a solid shell and financial performance differences of retaining shell company’s business or not. Finally put forward relevant recommendations and summarizations from the perspectives of government regulations and backdoor listing companies.