Research On Major Shareholders Arbitrage In Secondary Market By Private Placement

As a form of equity refinancing,private placement has been favored by major listed companies since the introduction of China's capital market.However,under the background of the general concentration of equity structure of listed companies in China,and private placement involves the redistribution of equity between new and old shareholders.Therefore,major shareholders are likely to obtain arbitrage gains in the secondary market through private placements.It is more typical for major shareholders to reduce their holdings of original shares when the stock price is at a high level,and to issue additional new shares after the stock price falls.They can even use their own control rights and information advantages to subscribe for additional new shares at a low price,and wait for opportunities to reduce their original tradable shares when the stock price rises.This arbitrage method kept the majority shareholders' control over the company unchanged,and it did not violate the market regulations that the restricted shares could not be reduced before lifting the ban.At the same time,it gained huge profits in the secondary market and infringed on the interests of small and medium shareholders.the majority of the GEM stockholders are in the background of private enterprises,compared with the large shareholders with state-owned enterprises,the profits of their arbitrage are totally personal income not the state,so there is a stronger incentive to arbitrage in the secondary market.Therefore,in 2009-2017,the private large shareholder who participated in the private placement and reduction of GEM listed companies was completed as a sample of the study,and calculated its absolute return,annualized absolute return,and excess return for arbitrage in the secondary market.The rate of annual excess returns was 22.77%,17.86%,13.55%,and 15.10%,respectively,which was higher than the normal market rate of return,greatly invading the interests of small and medium shareholders.Afterwards,this paper conducts comparative analysis of major shareholders' different arbitrage amounts,different industries,and timings of reduction.The results show that over 60% of private large shareholders receive positive arbitrage gains,and the overall average arbitrage amount is 37 million yuan;There is also a significant difference in the arbitrage yield of major shareholders holding timing.The absolute yield,annualized annual return,and annualized excess return of large shareholders who reduce their shareholdings prior to targeted additional issuance are significantly higher than that of major shareholders after the private placement.There is no significant difference in the excessreturn rate;through the classification and statistics of the industries in which the major shareholders are located,it is found that the major shareholders are more concentrated in the software service,media and capital goods industries,and the yield rate is much higher than that of other industries.In the software services,media and capital goods industries,it is apt to take advantage of additional placements in the secondary market.Finally,this paper further empirically studies the influencing factors of arbitrage gains of private large shareholders.The results show that the larger the proportion of large shareholders or the larger the issuance scale,the higher the excess return obtained;The return on net assets has no significant effect on the arbitrage returns of major shareholders;Major shareholders who have reduced their holdings prior to the private placement can obtain higher absolute returns,annualized absolute returns,and annual excess returns;P/E ratio have significant effects to absolute shareholders' absolute return rate,annualized absolute return rate,excess return rate,and annualized excess return rate.Large shareholders participating in private placements at low P/E ratios of listed companies can obtain higher arbitrage returns.