Study On The Fairness Of Consideration In The Private Placement Of Yongtai Energy

As a way of refinancing for the listing Corporations, the Private Placement has long, though not largely, been used in the capital market of our country. However, since the split share structure reform, the private placement has sprung up, and the momentum of its development is very rapid. Compared to other financing methods, there’re some prominent advantages for the private placement(the loose issue conditions, the flexible pricing selectivity, the low usage limit, and the simple procedures). Thus, nowadays the Listing Corporations are more inclined to choose the private placement.However, in recent years, through the private placement opportunities, more and more listed corporations manipulate the issue price and timing, pump non-performing assets, and transfer benefits by means of the earnings management before the issuance and the additional dividends after. With their advantages of information and decision-making power,the large shareholders grab the interests by the method of the private placement. However,due to information asymmetry and their weakness, small and medium-sized shareholders,even though knowing the big shareholders’ unfairness of consideration, are still helpless and at the mercy of their own interests being invaded, as with the companies operating conditions getting worse. In terms of laws and policies, listed corporations also play edge balls, and it’s hard for the regulators to determine the fairness of consideration in the private placement.The reason why this paper chooses the private placement of Yongtai Energy as a case study is that the author believes that there is substantial deviation between issuing price and actual price, the private placement reflects price imbalance in many ways, so it’s a typical case of the unfairness of the consideration in listed companies’ private placement. In the meantime,there isn’t positive announcement effect after the private placement announcement day, and capital market investors don’t think the private placement is a good choice, the company’s financial situation also has a marked decline after the private placement, which is a poor performance in the private placement. Through the study of Yongtai Energy, this paper hopes to conclude the complete assessment methods on unfairness of consideration, proves the bad effects of unfairness of consideration for minority shareholders and companies by unapparent positive announcement effect and deteriorating financial situation, puts forward to suggestions for regularizing the private placement, avoids more unfairness of consideration in capital market, and provides reference for the future private placement.