Home Furnishing Enterprises Listing Path Selection And Performance Researc

At present,the listing methods in China’s capital market mainly include two ways-IPO and reverse takeover.The verification system for securities offering in China is the approval system,which is complex and strict.Therefore,IPO will take a long time to wait for issuing shares,which makes many corporations with urgent needs for capital choose reverse takeover.With the development of big data,cloud computing and other information technologies,the “new retail” model has been innovated by some Internet corporations.In addition to the traditional retailer such as supermarket and department stores,corporations in “large consumption” industries such as home furnishing stores also follow the trend of “new retail”.The two leading corporations in the home furnishing store industry,Easyhome and Red Star Macalline,had a large amount of capital needs in the revolution process of“new retail”.As a result,they decided to raise money through the stock listing in the capital market.Instead of choosing the traditional IPO method,the Easyhome chose the reverse takeover to issue shares.What’s more,the Easyhome not only bought the“shell” of the shell company,but also integrate shell company’s main assets and business into its own business system,which is so-called “borrow a real shell” mode in reverse takeover.Because of the risk of goodwill impairment and integration,“borrow a real shell” mode is rarely adopted in Chinese capital market.Therefore,I will investigate the main reasons of choosing “borrow a real shell” mode from four aspects,such as financing channels,shell resource quality,integration risk and accounting treatment.And the reasons why Easyhome chose reverse takeover in addition to the common motivation of broadening the financing channels,the main motivation for choosing the special “borrow a real shell” mode are as following: i)high quality of shell resource asset,ii)low integration risks and synergistic effect,iii)negative goodwill without impairment risk.In the process of stock listing,the Easyhome selected the indirect method-reverse takeover,but another leading corporation Red Star Macalline chose the traditional method-IPO.It is very significant to investigate the reason why two leading corporations in the same industry chose the different methods to go public.Therefore,I further take the Easyhome and Red Star Macalline as examples to make a comparative analysis.And I mainly investigate the choice of listing methods from the following three aspects: listing conditions and asset quality,listing approval process and time,as well as listing cost.And the reason why Easyhome chose the reverse takeover is not avoiding strict IPO conditions for low asset quality.The main reason is that the approval time is shorter than the IPO,which can save a lot of time cost.At the same time,although the total cost of reverse takeover is higher than IPO,Easyhome mainly used equity to purchase shell resources,that is to say,the actual capital expenditure is small,which is also one of the reasons why Easyhome chose reverse takeover.At present,the registration system has been piloted in the science and technology innovation board and the growth enterprise board in China.With the improvement of the registration system,the listing efficiency in China will continue to be improved and the reverse takeovers seeking for listing efficiency are expected to gradually decrease.Finally,I compare the market performance after Easyhome and Red Star Macalline going public.Since it is difficult to control the difference in operating and financial status between Easyhome and Red Star Macalline,I can’t prove that the different market performance is completely caused by the choice of different listing methods.Therefore,I analyze various reasons for the difference in maket performance.I use the event study to investigate the short-term performance of Easyhome’s reverse takeover and Red Star Macalline’s IPO.The CAR within 30 days after the announcement of assets reorganization and the CAR within 30 days after IPO are significantly positive,indicating that the market is generally optimistic about Easyhome and Red Star Macalline’s listing.Further,I use the CAR and share price performance to compare Easyhome’s short-term market performance after listing with Red Star Macalline’s.The results show that Easyhome’s CAR within 30 days and share price performance in the one month after reverse takeover are lower than Red Star Macalline’s,which suggests that the listing price of Red Star Macalline’s stock is lower than the actual value.In order to make up for the information asymmetry of investors,Red Star Macalline gave investors more compensation and bore high listing cost.The reverse takeover is a process of private placement to original shareholders and the SEO price is based on the market price,in which the degree of information asymmetry is very low.Therefore,Easyhome doesn’t need to bear the high cost of IPO underpricing.Moreover,the P/E ratio of Easyhome after one month of listing is higher than that of Red Star Macalline,indicating that investors are more optimistic about the profitability of Easyhome and have higher expectations for its future earnings.In view of the longterm market performance after listing,I calculate the BHAR of the Easyhome and Red Star Macalline in 12 months and both of the BHARs are negative,which verifies the weakness of new shares in China’s stock market.The long-term market performance of the Easyhome’s reverse takeover is poorer than Red Star Macalline’s IPO,which may indicate that Easyhome adopted the "borrow a real shell" trading mode,which made it change its "asset-light" business model,leading to its poor long-term market performance.What’s more,the market overreacted to the reverse takeover and overvalued the stock price.Therefore the stock price adjustment after reverse takeover led to the low long-term returns of the stock.The short-term and long-term performance of Easyhome is worse than that of Red Star Macalline,indicating that investors have more trust for companies that choose the IPO listing method,while there are still doubts about the development prospects of companies that choose the reverse takeover method.Through the comparison of the two enterprise in the same industry,I investigate the reason why corporations in the same industry chose different methods to go public,which can enrich the studies and theories of the factors influencing the listing method selection for corporations.And the study also provides the experience of choosing listing methods for corporations who intend to go public.And the corporations can choose the appropriate method to go public based on their financial position,operating situation,capital needs and development strategy.At the same time,the comparative analysis of listing efficiency between IPO and reverse takeover also provides ideas for regulators to reform the registration system and improve listing as well as the capital market efficiency.