Analysis Of The Motivation And Effect Of New Energy Vehicle Public Enterprises Issuing Convertible Bonds

Since 2017,convertible bonds have started to gain popularity among listed companies with a suddenly increase in financing scale due to stricter government regulation on equity-based refinancing methods such as issuance of additional shares and share placements.SERES is an enterprise with a complete production line and supporting facilities for domestic new energy vehicles,and is a typical representative of domestic new energy vehicle manufacturing enterprises in China.The financing process of Xiaokang convertible bonds is similarly to that of most new energy vehicle enterprises,such as the design of terms and pricing,so this paper summarizes the motivation and effect of the issuance of Xiaokang convertible bonds by SERES,which is representative and can provide a reference for other new energy vehicle enterprises.This paper selects the case of SERES’ issuance of 1.5 billion yuan convertible bonds in 2017 to analyze the financing motives and effects of convertible bonds issued by listed new energy vehicle companies.It is found that the motivation of SERES to issue Xiaokang convertible bonds includes: from the advantages of convertible bonds,firstly,under the same financing amount,compared with debt financing,Xiaokang convertible bonds can reduce the financing cost and save the financial cost;Secondly,compared with equity-based refinancing methods,Xiaokang convertible bonds can delay the dilution of equity and maintain the control interests of the beneficial owner.From the perspective of SERES,firstly,under the situation of regulatory restrictions on equity-based refinancing,SERES’ internal retained earnings cannot meet the investment in new energy vehicle projects and R&D,so it chooses convertible bonds to raise funds;Secondly,SERES has been running with high debt for a long time and the pressure of interest payment is high,so issuing Xiaokang convertible bonds can improve cash flow and optimize capital structure.The effects of SERES’ issuance of Xiaokang convertible bonds mainly include:Firstly,on the whole,SERES’ issuance of Xiaokang convertible bonds’ capital raising investment—Jin Kang new energy vehicle project has been successfully put into operation and completed the expected production target ahead of schedule;Secondly,the financial performance.After the issuance of Xiaokang convertible bonds,the short-term solvency of SERES has decreased and the short-term financial pressure has increased;at the same time,the long-term solvency has not changed much,still running with high debt,but the ability to pay interest from EBITDA has plummeted;in addition,the operating capacity has decreased,but the efficiency of capital use has improved;Thirdly,the market reaction,based on the stock price analysis,found that,in the short term,Xiaokang convertible bonds have a negative impact on the stock price and a positive impact on the stock price,in the long term,due to the entry into the new energy vehicle market and the company’s better prospects;Based on the event study method,it is found that Xiaokang convertible bonds do not have a significant impact on the stock price in the short term,but have a negative impact in the long term.In summary,this paper gives three suggestions: Firstly,the government should strengthen supervision,regulate the investment of convertible bonds raised by enterprises,and establish the investment threshold of convertible bonds to promote the healthy and orderly development of the convertible bond market;Secondly,enterprises should strengthen their own asset and liability management and improve their operating capacity;Thirdly,investors should invest carefully and apply financial analysis and other methods to carefully judge the investment value of convertible bonds.