A Study On Private Equity Placements And Tunneling In DONGFANG PRECISION

On May 8,2006,the Measures for the Administration of the Issuance of Securities of Listed Companies promulgated by the China Securities Regulatory Commission was formally implemented.The document states that the issuance of securities by a listed company may be issued to a specific target in a non-public manner,and the private placement is the first to be included in the level of regulatory restrictions.Listed companies can raise funds through targeted private placements to enrich internal liquidity,achieve overall listing through private placements and acquisitions,expand the company's strategic intentions,and private placement financing with the special advantages such as low issuance thresholds,no profit requirements,simple issuance procedures,flexible pricing basis,and the limited amount of funds raised,so the private placement has quickly gained the favor of many companies.However,the target of targeted private placement is mainly the major shareholder of the company.Under the condition that the company's control power and cash flow rights are separated,the company's major shareholders have some interest transfer behaviors based on their own internal management advantages,and they have transferred the assets and profits of the listed company.This will further damage the interests of small and medium shareholders.The relevant policy provisions based on private placements in China have not yet been comprehensively improved.Directed issuance has been criticized,and it has even become a form of profit transmission with legitimate forms and hidden motives.In this paper,two targeted private placements by DONGFANG PRECISION are used as case analysis objects.Through the publication of textual data,data,and other carriers published by listed companies,the company conducts research on its interest-bearing behaviors in the two private placements,mainly from the timing of private placements and private placement pricing,information disclosure,earnings management,transfer of major shareholder's interests,and injecting asset quality.conducted a detailed study on the use of the Event Study Method to examine the market's response to the transfer of interests of major shareholders,and used financial analysis to examine the performance of listed companies after private placement.The study finds that:DONGFANG PRECISION deliberately suspended trading during the two private placements,selected timing for issuance,used information disclosure to manipulate stock prices,implemented earnings management,overvalued the value of the underlying company,and other interest-bearing behaviors.After the private placement,the market responded negatively and operating performance was poor,seriously undermining the rights and interests of small and medium shareholders.Through case analysis,the article proposes the following suggestions:First,change the pricing mechanism for private placements,further improve the private placement system,guide listed companies to implement policies,and rationalize pricing.Second,strengthen the assessment of injected assets,strictly control the quality of assets injected,and strengthen the professionalization of evaluation institutions;Third,strengthen information disclosure,promptly disclose the real process of private placement,and establish reward and punishment measures;Fourth,further improve the company's governance structure,from the inside out to improve the company's shareholding structure,and seek to optimize the organizational structure;Fifth,strictly review the object of subscription,Develop regulatory mechanisms and strengthen supervision.