Transmission Of Interest Behind Directional Add-issuance Of Dalian Daxian Enterprises Holdings Co.Ltd

Since the non-tradable share reform in 2006, directional add- issuance is increasingly prevalent. The number of companies that refinanced through directional add-issuance is larger than that of companies which refinanced through public issuance or allotment.Because the directional add-issuance program is simple and has no strict requirements on the company's performance, it is widely favored by the listing Corporation. However, the time of implementation of the directional add-issuance is relatively short time, as a result the law and the system is not perfect. There are loopholes in the process of directional add- issuance. Transmission of interest is not uncommon and the way of transmission of interest is constantly changing.At the beginning of the implementation of directional add- issuance, Scholars usually focus on directional add- issuance of asset injection. The mean of transmission of interests is low-quality asset injection. Now with the increase of Cash oriented directional add- issuance, a new form transmission of interests during directional add-issuance called "high throw bargain hunting" has emerged. In recent years, some controlling shareholders and the actual controllers in listing Corporations began to take advantages of information they owned and sold the stocks they hold in the secondary market or in block trading platform and then participated in the directional add-issuance of listing Corporation with low prices, forming a new mechanism for risk- free arbitrage. This kind of speculative arbitrage behavior is contrary to the logic of investment of the directional add-issuance, which makes use of the regulatory loopholes, and infringes upon the legitimate rights and interests of small investors, and becomes a new problem in the process of refinancing. In addition, some of the cases about directional add-issuance that controlling shareholders participate in are always accompanied with crackdown on the stock price.In view of this new type of transmission of interests during the process of the directional add- issuance, this paper selects the case of directional add-issuance in Dalian Daxian Enterprises Holdings Co.Ltd and try to reveal the possibility of transfer of interest in the process of directional add- issuance which large shareholders take part in. At the same time this paper also reveal the arbitrage process of cash oriented directional add- issuance, and puts forward the corresponding policy recommendations on the basis of the conclusion, in order to contribute to the healthy and orderly development of C hinese securities market and reduce the transmission of interest during the process of directional add- issuance.