Study On IPO Pricing Of Companies Listed On GEM In China

On October 30,2009,the first batch of 28 companies that have been listed on the Growth Enterprises Market(GEM).China’s GEM was launched formally and enter into a substantial operation.As the specification of the GEM in China,it will not only provide a convenient financing channels,but also play an important role to establish a multilevel capital market..Similarly,IPO in GEM as a bridge of investors and high growth companies,it provides direct financing channels for the company,also provides opportunities for all kinds of investors.How to accurately reflect companies’ actual value and set a more reasonable price for IPO have now take in mind of majority of managers and investors.The main content of the paper is the research on the GEM IPO pricing from the aspects of theory and practice.The first part of the paper is about the basic concepts of the GEM,the characteristics and basic functions of the GEM.From the contrast of the GEM in the word and main market,there are some problems that have to be faced and solved of the GEM.Based on the analysis of each section of the IPO system,there are many factors influencing the IPO pricing in the GEM from the perspective of qualitative.There are some pricing methods of the initial public offerings that introduced in the paper and the limitations of IPO pricing for companies in the GEM.The theoretical basis of this paper is the analysis content of the IPO pricing.Based on analysis,we study the life cycle of companies in the GEM and the style of the real option.Considering the high profitability,high growth and high risk,we describe the company’s future investment income by the real option and describe the value of the company by VaR.We build the causal compound real options with multi-variables and multi-uncertainties pricing model.In order to improve the accuracy of the calculation,we introduce the model with trigeminal tree model and EVA method.And consider the Game process between multiple stakeholders in the pricing process,we build the corresponding model.Because institutional investors play the important role in the pricing process,we take the price by real option model as the valuation for the GEM company in order to price.At last,we set the specific case of Laimei Pharmaceutical company to test the models accuracy and feasibility.The calculation results of the two models are 25.26 and 23.12 respectively.The results are higher than the IPO price,below and more close to the opening price of the first day.To verify the results closer to the real value of the company.