Arbitrage Of Major Shareholders Using Exchangeable Bonds And Private Placement:

Arbitrage refers to the risk-free return obtained through the price difference of financial products in different periods.Major shareholders of listed companies using directional issuance of exchangeable bonds and the arbitrage is a kind of typical spread arbitrage.On the one hand,through private placement to obtain cheap stocks.And on the other hand,through the exchangeable bonds to sale the stock at high price.But such arbitrage not conducive to the maintenance of fair capital market and the protection of the interests of small and medium-sized investors.At present,exchangeable bonds occupy an important position in China's bond market both in terms of quantity and financing scale.As a new financing tool,exchangeable bonds are increasingly favored by the capital market and are gradually widely used in financing,reduction of holdings,mergers and acquisitions and other fields.At the same time,since the introduction of private placement,private placements have gradually become the main means of equity refinancing for listed companies in China,and more and more listed companies choose to use private placement to raise funds from the capital market.As private issuing of exchangeable bonds and new shares,the threshold and approval process is greatly reduced and simplified.Since inadequate disclosure of information,coupled with the dominant positon of major shareholders in listed companies,major shareholders are very easy to use their control and information advantages in capital market to arbitrage,which damage the interests of minority shareholders and investors.Therefore,it is of great significance to study the behavior of major shareholders of listed companies using exchangeable bonds and private placement for arbitrage.This paper mainly adopts two research methods: literature research and case analysis.In the aspect of literature research,through reviewing a large number of literatures,it provides theoretical explanations for the major shareholders of listed companies to issue exchangeable bonds and subscribe for private placement new shares.In terms of case study,taking Zheng bang Group as an example,the process of large shareholders of listed companies using exchangeable bonds and private placement of new shares for arbitrage is sorted out.By analyzing the behavior of arbitrage,this paper aims to clarify the timing of capital operations which major shareholders conducted,and clarify their intrinsic motivation and logic.Besides,this paper will analyze the reasons for the success of arbitrage in a deep level,and put forward suggestions from the perspective of supervision.Through in-depth analysis and discussion of the case,this paper mainly comes to the following conclusions: First,the purpose of Zheng bang Group issuing exchangeable bonds and subscribing private placement new shares is to arbitrage.Second,Zheng bang group's ability to control the timing of the issue of exchangeable bonds and private placement is the main reason for the successful arbitrage.Thirdly,the difference between the price of exchangeable bonds and the issuing price of private placement is the direct cause of the successful arbitrage.On the basis of the research conclusions,combined with the whole process of Zheng bang Group issuing exchangeable bonds and private placement and the reasons for the success of the arbitrage,the following enlightenment can be drawn.First,the regulatory authorities need to screen the company's motive of issuing exchangeable bonds and private placement and prudently approve the issuance qualification.Second,the regulatory authorities should strengthen the supervision of arbitrage-type issue of convertible bonds and private placement.Finally,the regulatory authorities should further strengthen the supervision of the behavior of major shareholders.This paper is divided into five parts,the main content is as follows: The first part clarifies the research background and significance of this paper,review the literature related to exchangeable bonds and private placement,comb and summarize the existing research.The second part clarifies the characteristics of two refinancing instruments,exchangeable bonds and private placement new shares.And systemically sorts out the existing arbitrage mode of using exchangeable bonds in the capital market.The third part introduces the case studied in this paper and makes a comprehensive and in-depth analysis of the situation of Zheng bang Group issuing exchangeable bonds and i Zheng bang Technology's private placement new shares.The fourth part analyzes the reasons for Zheng bang Group to issue exchangeable bonds and Zheng bang Technology's private placement new shares,and quantifies the economic income of Zheng bang Group from arbitrage.In the fifth part,based on the summary of the existing literature and the results of the case study in this paper,we draw inspiration and call on the regulatory authorities to identify the refinancing motivation of listed companies and strengthen the supervision to major shareholders.The contribution of this paper is as follows: the current academic research on arbitrage mainly focuses on the analysis of financial product arbitrage strategies,and there are few studies on the major shareholders of listed companies using the advantage of control and information to arbitrage in the primary market.In addition,due to the late start of China's exchangeable bonds,relevant researches rarely combine exchangeable bonds with other forms of financing,which makes it impossible to identify the arbitrage behavior of major shareholders of listed companies.This paper studies both exchangeable bonds and private placement new shares,and tracks the changes in the stock prices of listed companies in a period before and after the issuance of exchangeable bonds,which deeply analyze the reasons for the successful arbitrage of major shareholders of listed companies.This paper theoretically enriches the capital market arbitrage and self-interest behavior of major shareholders,and provides case basis for exchangeable bonds and private placements.