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Research On Private Placement Equity Crowdfunding's Operating Mechanism

Posted on:2018-03-12Degree:MasterType:Thesis
Country:ChinaCandidate:X Y LiFull Text:PDF
GTID:2359330512496766Subject:Finance
Abstract/Summary:PDF Full Text Request
Equity crowdfunding refers to start-ups' finance by selling their equity through the Internet platforms.Because of the scale of the Internet and the low threshold,equity crowdfunding has been quickly recognized by the market.After the financial crisis in 2008,equity crowdfunding first appeared in the United States.America's JOBS act coming into effect in 2012 released the regulatory restriction of equity crowdfunding.The first domestic equity crowdfunding platform appeared in 2011.Since 2014,a series of notices and regulations have been issued to define equity crowdfunding according to the situation of China.Finally,they decide to divide equity crowdfunding into two categories which are private placement equity crowdfunding and public offer equity crowdfunding according to different issue scopes and investment thresholds.They also require for special rectification of private placement equity crowdfunding platforms and a pilot of public offer equity crowdfunding platforms in the near future.However,in America and other foreign countries,private placement equity crowdfunding and public offer equity crowdfunding are never distinguished from each other.By now,public offer equity crowdfunding hasn't appeared in the true sense in China.In the meanwhile,the operation and supervision of China's private placement equity crowdfunding platforms is still in the exploratory stage.As a result,the platforms,the fund-raisers and the investors are facing unknown and uncontrollable risks in the process of equity crowdfunding.We study on operating mechanism of private placement equity crowdfunding and lay a theoretical foundation for the pilot of public offer equity crowdfunding by means of analyzing from the perspective of participants,theoretical deduction,model simulation and cases.First,we make the concept of equity crowdfunding clear according to domestic regulatory environment,divide the equity crowdfunding platforms with three different standards which are issue scopes and investment thresholds,hierarchical natures and sources of flow,and analyze the number of platforms,amounts of financing and problems of domestic private placement equity crowdfunding.We also select 66 normally operating projects from 7 equity crowdfunding platforms as a sample to analyze the project investment risk of private placement equity crowdfunding.Secondly,we innovatively explain the connotation of the operating mechanism of private placement equity crowdfunding from four aspects which includes three participants and their relations in the process of equity crowdfunding,the business modes of the platforms,the investment patterns and the work flow of the equity crowdfunding.Then,according to the information cascades theory,we take the syndicate mode(typical of China's private placement equity crowdfunding)as the starting point,simulate the operating process of the private placement equity crowdfunding,in order to research on two kinds of risks which are difficulty in good projects' being financed and probability of bad projects being financed.We find that when most investors are not professional enough,a syndicate mode is necessary and that more emphasis should be put on prevention of the moral risk of the lead investors,improvement of the projects' quality and the platform's ability of checking as well as auditing the projects.To compensate for the unrealistic hypothesis and the only coverage of the investment part involved in the simulation,we analyze respective risks faced by each participant of private placement equity crowdfunding in syndicate form according to its sources of flow.We find that private placement equity crowdfunding platforms may face legal risks,fund custody risks and reputation risks;that fund-raisers may face risk of illegal issuance of stocks,risk of commercial secrets and intellectual property infringement;and that investors may face risk of overvaluation of the projects,moral risk of the lead investors,risk of ways in holding shares,management risk after investment,liquidity risk.Furthermore,we put forward corresponding preventive recommendations towards private placement equity crowdfunding platforms and the regulator.Last but not least,according to America's JOBS act and European developed countries' regulatory experience,we look further into the unique problems and solutions to China's public offering equity crowdfunding.
Keywords/Search Tags:equity crowdfunding, operating mechanism, syndicate, information asymmetry, information cascades
PDF Full Text Request
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