A Case Study On The Financingg Of Convertible Bonds Issued By Xiaokang Shares

Convertible bond is a kind of bond that the holder can convert into the company’s stock at a certain proportion or price after a certain period according to the agreement.It is a hybrid financing tool with both debt and stock characteristics.Affected by the level of economic development,most listed companies in China prefer equity financing.In recent years,as China Securities Regulatory Commission has increased the 18-month financing frequency limit for additional issuance and rights offering of listed companies,more companies prefer convertible bond financing,considering issuing convertible bonds is deferred equity financing.In recent years,the number of issuance and financing scale of convertible bonds in China have seen explosive growth.In 2021,the financing scale of convertible bonds reached 282.849 billion yuan,and convertible bonds have become one of the main channels for refinancing of listed companies.Xiaokang is one of the important automobile manufacturing enterprises in western China,mainly engaged in the production,sales and service of complete vehicles,engines and spare parts.Under the guidance and support of national macro policies for new energy vehicles,Xiaokang Shares issued 1.5 billion yuan convertible bonds for research,development and production of new energy vehicles.By December 31,2021,xiaokang convertible bonds have been issued for 4 years,and86.2% of the shares have been converted.This paper takes the issue of convertible bonds of Xiaokang Shares as the research object and uses case analysis method to conduct research and analysis.In the theoretical part,the content,concept,characteristics,advantages and disadvantages of convertible debt financing,refinancing methods and requirements as well as relevant theoretical basis of the research on convertible debt at home and abroad are described.Then,the case of xiaokang convertible bonds is introduced,including the introduction of Xiaokang CO.,LTD.,development prospect,use of the financing project of the convertible bond,plan clause design,issuance process of the convertible bond and the situation of the conversion of shares,etc.The case analysis is mainly carried out from five aspects,including the feasibility analysis of the discovery of convertible bonds by Xiaokang shares,the analysis of the reasons for choosing to issue convertible bonds for financing,the comparative analysis of the difference between the theoretical value of convertible bonds and the market price,the financing effect of Xiaokang convertible bonds and the impact on the equity structure.Through the analysis from above five aspects,this paper finds that favorable internal and external conditions,reasonable design of issuing scheme and underprice issuing can reduce the issuing risk.After comparing equity financing,debt financing and convertible bond financing,this paper finds that the main motivations for choosing convertible bond financing are low financing cost,large financing scale,few restrictions and short-term avoidance of dilution of original shareholders’ equity.Tracking for five consecutive years to well-off turn debt theory value and the market price and the analysis reason,this paper finds that the release value is undervalued by the market at the beginning,a well-off shares underpricing issuing convertible bonds are issued in order to reduce risk and compensate the original shareholders.With the approaching of maturity date,theory value and the market price gap is getting smaller,which illustrates the effectiveness of the market mechanism;Through the analysis of the well-off shares issued convertible bonds before and after five years of solvency,profitability and operation ability,this paper finds that the convertible bond financing effects on financial condition is limited.Due to the financing project payback period is longer,the research time is shorter,so need more time to examine the depth of the impact on the financial status.Convertible bonds have a dilution effect on the equity,which is conducive to optimizing the equity structure.Finally,some conclusions are drawn based on the above analysis and suggestions are put forward.When choosing financing methods,listed companies must combine their own situation,improve risk awareness.Listed companies should also carefully choose and reasonably use the funds to improve efficiency.It is hoped that the research of this paper will have universal applicability to the issue of convertible bond financing,provide theoretical suggestions for listed companies preparing to raise funds through convertible bonds,and help reducing the financing risk of convertible bonds.