Case Study Of Gac Convertible Bond Issuance

With the deepening of China’s financial market reform,many innovative financial instruments are favored by investors.Among them,convertible bonds,which organically combine the nature of ordinary bonds and the nature of stock options,have become a good choice for listed companies to raise funds because of their lower financing costs and greater flexibility in adjusting capital structure.For investors,the design of embedded options in convertible bonds can guarantee the stable income of debt interest to a certain extent and greatly increase the profit margin of investors.Combined with the characteristics of embedded European stock options in convertible bonds,it is feasible and applicable to use b-s model to derive theoretical value.However,based on the structural complexity of convertible bonds,it is not ergodic to consider only the variables in b-s model when designing the issuance scheme.Therefore,the research on the issuance scheme design of convertible bonds in China is not mature,which leads to the fact that the value of convertible bonds is generally underestimated.Based on the literature analysis method,according to the analysis of convertible bonds pricing perspective of academic research system of comb summary,foreign scholars found the analysis of the affecting factors for the value of convertible bonds is more comprehensive,including pro-phase model of pricing factors influencing on event type and late departure of qualitative analysis,and more domestic scholars to valuation model of convertible bonds pricing analysis,few previous consider issuers of credit risk,specific industry cycle,the period of the convertible bond value such as market volatility.This paper holds that the undervaluation of convertible bonds reflects the information asymmetry theory,agency cost theory,capital structure theory,signal transmission theory and other economic theories,which also lays a solidtheoretical foundation for the subsequent case analysis in this paper.Based on the above phenomenon,this paper takes the case of GAC convertible bond issuance as the analysis object,introduces and analyzes the design of GAC convertible bond issuance program and the setting of value measurement determinants in the program.This paper interprets the important clauses in GAC convertible bond issuance plan,analyzes the intention and purpose of designing the clauses in combination with the group’s situation and market conditions,and analyzes and evaluates the rationality and feasibility of the issuance plan design.Secondly,the b-s model is used to deduce the theoretical value of GAC convertible bonds at the time of equity conversion and the highest market level,and the conclusion is drawn that the market value of GAC convertible bonds is generally underestimated.Finally,based on the comparative analysis of GAC convertible bonds and other convertible bonds in the industry,the reasons for the undervaluation of GAC convertible bonds mainly include the following points.Second,it fails to fully consider the credit risk of the issuing entity and the impact of the event type factors which are difficult to quantify.Thirdly,the hypothesis of b-s model is quite different from the actual situation of China’s convertible bond market.This paper aims to turn GAC issuance of case analysis,studies the influence factors of undervalued,as a peer enterprises provide referential Suggestions issuing convertible bond,convertible bond issuers should rely on of the economic environment as a whole,by the market supervision system,on the basis of valuation pricing model,distribution plan design as the core,to finance investment projects as the key,take the market development trend of modification,will help the enterprise to develop proactive convertible bond issuance scheme.