A Study On The Impact Of Private Placement On The Performance Of Companies Listed On Growth Enterprise Market

Private placement,as a financing method that selling stock shares to pre-selected investors and institutions rather than on the open market,has many advantages,such as generating capital with less cost,fewer regulations and attracting the most suitable investors.Therefor,private placements are now common for startups as they allow the company to obtain the money they need to grow,this is why more and more gem listed enterprises choose to finance through private placement recent years,especially the emerging technology enterprises.However,private placement can also bring potential risks,such as credit risk,loss of market value or neglect of potential investors,which may negatively affect the value of the enterprise.Therefore,it is necessary to study and discuss the motivation for gem enterprises to choose private placement,and the impact of private placement on GEM enterprises’ financial performance and market reaction.This thesis first summarizes the current theoretical research on the private placement,then reviews the relevant policy and development status of private placement in China.On this basis,this thesis chooses Huizhou EVE,a gem listed company,as a case company.The basic business of Huizhou EVE is disposable lithium primary battery.In the process of development,the company had gradually expanded its business to the field of consumer lithium-ion battery and power energy storage battery.The company has the characteristics of stable basic business revenue and balanced development of new businesses.The company is located in the second tier in the field of power battery production,and has actively expanded its capacity and business scale through financing to strive for greater market share recent years.Taking the company as a case,analyzing the impact of its private placement on business performance has a certain guiding role and reference value for the majority of late developing enterprises and transformation enterprises in emerging industries.Therefore,this thesis analyzed the impact of Huizhou EVE’s private placement on its performance in 2020,including the specific motivation for the company to choose the private placement,as well as the market reaction and financial performance after the information disclosure and specific implementation of the private placement.Based on the analysis of the timing and developing demand of Huizhou EVE,this thesis demonstrates the inevitability of the company to take the private placement as the financing method.After that,this thesis analyzed the market reaction after the private placement through event study method.After that,analyzing the market response of Yi Lithium-oriented,and combined with single financial indicators analysis and primary component analysis,the impact of the increase of lithium-energy financial performance is increased.The main conclusions of this study are as follows:(1)The private placement didn’t bring obvious risks related to financing and reputations to Huizhou EVE,which is reflected in the following aspects: First,the private placement adopts cash subscription and the issuance pricing conforms to the requirements of the private placement policy,so there is no risk of bringing non-performing assets to the company.Secondly,the shareholder structure of the company did not change significantly before and after the private placement.Thirdly,Huizhou EVE had timely and detailed disclosed the use and implementation of the funds raised in this private placement,and there is no misappropriation of funds or selective disclosure.Finally,the usage of the private placement funds is clear,and the project cash flow recovery cycle is short,which is conducive to the continued development of subsequent equity financing.(2)The private placement has a positive impact on the market response of Huizhou EVE.Through the event study method,this thesis analyzes the market reaction before and after the private placement in the short and long term.In the short term,the change of stock price and the fluctuation of excess return rate are analyzed by using event window analysis method.In the long term,the buy-hold abnormal return method is adopted to analyze the effect of the market compound effect on excess returns.The analysis from both aspects shows that the market had a good response to the private placement.(3)The overall financial performance of the private placement is good.This thesis starts from the single dimension and the whole dimension,and finally combines the principal component analysis to analyze the financial data of EVE energy from 2010 to now.It concludes that EVE energy’s profitability,debt paying ability,development ability,operation ability and cash flow management ability have been improved after regular additional issuance.