IPO Pricing Analysis Of Gem Pharmaceutical Enterprises

As an important part of China’s multi-level capital market,the Chinese GEM(which is called Chi Next)is a capital market that specializes in assisting emerging high-growth companies to raise funds and conduct capital operations.Poly Pharm is a high-tech enterprise specializing in drug research and development,production and sales.Its leading product market has excellent performance.The capacity usage rate of production lines were over 100%.However,its revenue scale is small and it is difficult to increase output due to insufficient funds.Therefore Poly Pharm choose to be listed on Chi Next for its low application conditions,to break through the bottleneck of development at this stage.In the process of Poly Pharm’s IPO,in order to succeed in issuance which means a all-win result that the issuer get enough funds,the underwriter complete all the procedure,the investors get payback,the issue price should meets the expectation of the investors and the intrinsic value of the issuer.This paper focuses on the IPO pricing of Poly Pharm.This paper establishs a mathematical model to work out a more exact IPO issue price,which will help companies be listed on Chi Next more easily.The mathematical model will also help investors improve investment strategy and help the underwriters to improve the pricing model and algorithm.This paper takes the Poly Pharm which was listed on the Chi Next in 2017 as a case.This paper analyzes the Poly Pharm’s financial indicators of profit,debt and operation indetail which lays a good foundation for the follow-up forecast,then compares the differences among a variety of IPO pricing models and use the free-cash-flow pricing method and economic-value-added pricing method.Next,this paper uses financial analysis data,enterprise life cycle theory and the future development plan of Poly Pharm to predict future the changes of future free cash flow and EVA and calculate the issue price based on the intrinsic value of the enterprise.At last,this paper analyzes the influence between issuers,underwriters and investors in the IPO process to establishes a mathematical model and substitutes the issue price based on the intrinsic value into it to work out a IPO issue price under the influence of the three parties.In the analysis of the rationality of high-tech enterprise IPO pricing,this paper draws on the research of experts and scholars.Through the increase of stock price on first day of IPO and condition of fundraising and so on,this paper judge the rationality of the model calculation results,and compare the result with actual IPO price.The calculation result is slightly higher than the actual issue price,indicating that the comprehensive model of this paper is applicable to Poly Pharm’s IPO case under the premise of combining the financial status and development plan of Poly Pharm.The comprehensive model of this paper has potential replication for the pharmaceutical industry of Chi Next.It also provides reference for the similar enterprises to set a rational IPO issue price of Chi Next in the future.