| In order to help these enterprises which are still in the initial stage of independent innovation to get better access to financing,the SFC officially launched the Growth Enterprises Market in October,2009.In less than 10-year-time,there have been more than 700 companies listed successfully.The average daily turnover is up to more than 60 billion RMB.The existence of GEM promotes the diversification of capital market,which is an indispensable part of China's capital market.LETV was listed on the GEM in the Shenzhen Stock Exchange in August 2010,which manages in Internet video business,has been pursued by investors once.It had a high over-raised funds rate which is up to 160%at the time of listing,much higher than the average rate.In the next few years,LETV managed across several industries.It has launched super TV,music video and other products.It even issued a concept car.The stock price rose quickly as well.It became a hot spot among investors.However,LETV encountered a serious financial crisis in 2016,with the suppliers to come to debt,the chairman resigned,the shares were frozen,and the stock was once stopped for nine months.Therefore,this paper selects the LETV as the research object.Although the GEM plays a positive role in the capital market's resource allocation process,but its shortcomings are gradually revealed.There is a common"three high" problem including high price,high P/E ratio and high over-raised funds ratio appeared among these companies listed in the GEM for its initial public offerings.Although this problem also exists in the Main-board Market and SME Board Market in some degree.However,this problem is more sever in the GEM.In order to standardize the use of super raise funds,as well as to prevent enterprises from private use,the Shenzhen Stock Exchange issued a series of relevant provisions.However,in the practical application,there are still many enterprises which have the behavior of inefficient usage of funds.Although these funds have brought in abundant cash flow to enterprises,this kind of inefficient investment can easily cause a series of fund problems in the future,which disturbed the ability of the capital market's resource allocation.According to research,the over-raised funds are mainly used in three aspects by LETV:(1)partly repayment of bank loans in advance;(2)the purchase of the copyright of films and television dramas and the server assets or the trusteeship services;(3)the increase of capital to the subsidiary(the capital added to the subsidiary will also be used for the subsequent purchase of the copyright).Therefore,more than 80%over-raised funds are used for investment related to films and television dramas' copyright purchase.In the case of the use of super raised funds,this paper believes that there are three improper points exist:(1)under the situation of the reduction of operating funds,the distribution of high cash dividends is equivalent to the indirect use of excess funds;(2)the great deal of purchases about the copyrights of films and television dramas is kind of single investment projects,which will increase the risk of investment,besides,the return of the investment is slow;(3)excessive consumption of excess-raised funds will result in a decrease of future cash flow.More and more loans aggravate the financial risk of LETV.The ensuing economic consequences are:(1)the rapid consumption of super raise funds has aggravated the risk of the financial chain breakage in the following years;(2)the excessive investment in the films and TV dramas made by the super raise funds makes the investment income drop;(3)the shareholder's wealth is reduced as well;(4)the large use of the funds makes the enterprise borrow more,which increases the debt proportion of the enterprise.This paper argues that there are three reasons for this economic consequence:(1)the profit ability of LETV's main business is poor,its own "Hematologists"ability cannot supply the various investment expenditures of enterprises,which resulting in serious reliance on external financing;(2)LETV has the motivation of maintaining the stock price at a higher level,so that it adopts the strategy of over investment;(3)the "one shareholder alone" system and the characteristics of the family ownership structure increase the information asymmetry between LETV and the investors,and the investors know very little about the real financial situation of the enterprise.The author has put forward three suggestions to LETV:(1)strengthen its main business and "Hematologist" mechanism,so that LETV can reduce the dependence on external financing;(2)to slow down its extravagant investment strategy,plans more before arranges investment strategy;(3)expanding a variety of financing channels,in order to reduce debt financing,thereby the company's future financial risk will decrease as well.At the same time,this article also put forward three enlightenments on the super raise funds:(1)the regulatory departments and relevant institutions should improve the regulations about the use of super raise funds,including the circumstance of usage,the limitation of usage,and so on;(2)the relevant departments and the Community should strengthen synergies,and jointly strengthen the supervision of listed companies for the use of funds;(3)the IPO pricing mechanism should be improved,in order to reduce the convergence of interests between underwriters and issuers.Besides,to promote the marketization of pricing mechanism to reduce the production of super raise funds fundamentally.The innovation of this paper is:(1)to explore the impact of the improper use of over-raised funds of LETV,which supplement the existing research field on LETV in China;(2)due to the difference of the issuing system,there are relatively few researches on over-raised funds overseas.In this paper,the method of case analysis is used to combine theoretical analysis with specific cases,to apply the abstract theory of fund raising to the actual situation of the company,which enriches the existing theoretical research.At the same time,it is of great significance for other listed companies to use the extra funds efficiently in the future.There two shortcomings of this article:(1)due to the over-raised funds were used earlier,it is impossible to prove directly whether the financial crisis occurred in the past few years is directly related to the improper use of funds;(2)LETV is the first Internet video-type website company which listed in GEM,and it had consumed its super raise funds in the first two years of its listing,while most companies in the same industry were listed abroad,so there is no comparison between these companies in these two years when the funds were used;(3)it's little hard to tell get rid of other factors that may have influence on the performance of LETV. |
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