Based On The Motivation Of Xingfa Group For Large Shareholders And Institutions To Issue Private Placements

After the shareholding reform in 2006,the private equity placement has been showing the rapid development of the situation in china,it has become the main way of Chinese listed companies to carry out equity financing.According to the different objects of private equity placement,it could be divided into three category: completely private equity placement for the major shareholders?completely private equity placement for the institutional investors and private equity placement for both major shareholders and institutional investors.The case of this paper is Hubei Xingfa Chemical Group Co.,Ltd,which belongs to the private equity placement for the major shareholders and the institutional investors,by analysising the relevant data on its private placement,it could be judged that the motivation of this company's private equity placement is whether tunneling or alignment of interests,and it can make recommendations based on conclusions in order to make contribution for the improvement of the private equity placement.This paper reviews and combs domestic and foreign literatures,and analyzes Agent theory?Information asymmetry theory and Supervision effect theory.In China,the stock is relatively concentrated,based on this kind of circumstance,we find that major shareholders will easily confine the price which due to its' power of control and setting price.This act violates the interests of small and medium shareholders for the purpose of tunneling.So,after lead into institutional investor,Whether can it realize the benefit coordination between Shareholders and company or major shareholders and small shareholders?This paper analyzes Hubei Xing Chemical Group Co.,Ltd from two points.On the one hand,by comparing the differences between the price of private equity placement and the price of choosing day,we find that the major shareholder and institutional investors didn't have the motivation of tunneling subjectively,the price after the stock lifted is always lower than the issuance price of private equity placement,This shows that the private equity placement does not achieve the objective conditions of tunneling.Anyway,the private equity placement has no motivation of tunneling,it is for promoting the company's development,enhancing the strength of the company,and achieving tunneling.On the other hand,by Analysising the Xingfa Group's business structure,industry chain,financial position,profitability and performance of the stock market,it can be concluded that,after private equity placement,the company's business structure,the industrial chain have been further optimized,the stock price showed excessive month-rate of return in short-term,but it didn't show well as expected in financial condition,profitability and long-term performance of stock price.After the above analysis,This paper believes that Xingfa Group's motives for private equity placement is to achieve the alignment of interests between company and shareholders,major shareholders and small shareholders,but the time of private equity placement is in the early recession,and this situation declined the effect of alignment of interests,at the same time,the company is overly optimistic about the expected results after the completing the project.We could make three recommendations based on the conclusions: listed company should predicte industry cycle before private equity placement and carry out private equity placement in the rising stage of industry to play the effect of alignment of interests of private equity placement as much as possible;the object of private equity placement should analysis more carefully about the feasibility of project to avoid the loss of interest due to the over-optimistic forecast;Small and medium-sized shareholders should strengthen their professional ability and concern about the abnormal issues before the private equity placement to maintain their own interests.