Research On The Motivation And Economic Consequences Of Convertible Bond Financing Of Tongwei Shares

Convertible bond is a financing method with bond attribute,equity attribute and call option attribute.As for the convertible bond market in China,due to its short development period and incomplete construction of relevant regulations,convertible bonds have not been the mainstream financing method for listed companies in China.It was not until the official introduction of the "New Refinancing Regulation" in 2017 that the China Securities Regulatory Commission provided strong support for convertible bond financing of listed companies,and the convertible bond market in China was able to develop rapidly.Considering the unique conversion mechanism of convertible bonds,when making financing decisions for listed companies,it is necessary to focus on how to maximize the utilization of the characteristics of convertible bonds to improve business performance.Tongwei Shares is a listed company in the photovoltaic industry,which issued a "Tongwei Convertible Bond" with a financing scale of 500 million yuan in 2019.In order to study how Tongwei Shares makes convertible bond financing decisions and how to use convertible bond financing to promote the company’s development,the article takes Tongwei Shares as the research object,and conducts in-depth discussions on the motives and economic consequences of its convertible bond financing.After combing the relevant research literature,relevant concepts and theoretical basis at home and abroad,the article uses case analysis and event study to study the motivation and economic consequences of convertible bond financing of Tongwei Shares.Firstly,the article introduces the case of Tongwei Convertible Bond Financing,which sequentially introduces the basic situation of Tongwei Shares and the basic situation of "Tongwei Convertible Bond";Secondly,the article conducts an analysis of the driving forces behind the financing of Tongwei Convertible Bonds from three aspects: internal demand,financing system,and comparison of financing methods;Finally,the article analyzes the economic consequences of Tongwei’s convertible bond financing from three aspects: market effects,financial effects,and controlling shareholder interests.Research has found that Tongwei’s use of convertible bond financing is not only due to the need to provide later stage funding for the project and indirectly improve capital structure,but also because convertible bonds have advantages in financing systems and are more advantageous than other financing methods.In addition,the economic consequences of Tongwei’s convertible bond financing not only present short-term positive market effects,but also improve the company’s profitability and debt repayment ability in terms of financial effects,reduce the company’s financing costs,and optimize the company’s capital structure;In terms of controlling shareholder interests,Tongwei’s controlling shareholder has completed convertible bond reduction arbitrage,the earnings per share and control position have not been negatively affected by the convertible bond conversion.Based on this,the article proposes three suggestions for other listed companies: firstly,listed companies should reasonably choose financing methods to maximize the utilization of the characteristics of different financing methods while meeting their funding needs;Secondly,listed companies should pay attention to the prospects of fundraising projects for convertible bond financing,in order to promote the implementation of convertible bond conversion mechanisms;Thirdly,listed companies should make good use of mandatory redemption clauses in their convertible bond financing to positively guide the conversion of convertible bonds into stocks.