IPO Pricing Analysis and ICBC IPO by fdjerue7eeu

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									IPO Pricing Analysis and ICBC IPO
?Theoretical method of stock valuation
First, the relative valuation method
Refers to the valuation of the stock of comparable companies or
representative of, with particular attention to companies with similar
business and similar size of newly issued other recent initial public
offering in order to obtain the valuation basis. Review of comparable
lead underwriter of the initial pricing and distribution company of
their secondary market performance, and characteristics of the issuing
company's price adjustment for the valuation of new issues. Companies
Act in the use of comparable, the ratio index can be used to compare
ratios, including P / E (price-earnings ratio), P / B (book value), EV
/ EBITDA (enterprise value and interest, income taxes, depreciation
and amortization earnings ratio) and so on. Value theory that the
inherent value of the stock, the stock price is its intrinsic value in
the primary market, secondary market reflects, in a perfect market,
the stock price should be less than the value based on fluctuations
around the intrinsic value, while not long from its intrinsic value.
One of the most commonly used indicator is the ratio of earnings and
book value.
1, the price-earnings ratio method. Stock market price earnings ratio
= earnings per share ¡Á.
Valuation through the price-earnings ratio method, the first
pedestrian to be earnings per share calculation starting; then the
average price-earnings ratio based on the secondary market, the
issuer's industry conditions (stock price-earnings ratio of similar
industries), the issuer's business and its growth release formulation
such as price-earnings ratio; Finally, the issue of price-earnings
ratio and earnings per share valuation of the product of the decision.
NOTE: The determination of net income per share fully diluted method
¢Ù. Method is to use the full year fully diluted net income divided by
the total issued share capital, net income per share directly
obtained. ¢Ú weighted average method. Weighted average method, the
formula for calculating net income per share: Net income per share =
annual net profit / [number of total shares issued before the public
offering of equity + The number ¡Á (12 - Issue Month) ¡Â 12].
2, the book value method. Stock market prices = ¡Á book value per share
of net assets.
By book value method of valuation, the first review should be based on
net assets after the calculation of net asset per share of pedestrians
proceeding; then, the average book value based on the secondary
market, the issuer's industry conditions (similar trades stocks The
book value), the operations of the issuer and the proposed rate of
return on net assets released book value; Finally, the issue of net
assets per share book value and valuation of the product of the
Relative valuation method is simple to use, with quick access to the
value of assets being evaluated, especially when the financial markets
have large number of "comparable" assets during the
transaction and the market price of these assets is the right time.
However, the valuation of this method prone to bias, mainly due to:
"comparable companies" is a subjective concept of choice,
the world is not in exactly the same in terms of risk and growth of
two companies; the same time, this method usually ignores the decision
of assets final value of the internal factors and assumptions;
addition, the method is easy to market, "comparable
companies" mispricing (over-or underestimate) the introduction of
the valuation of the target stock.
Applicability of the relative valuation method
Relative valuation method is often used for company valuation of
European companies. China's share issue price has been using
price-earnings ratio method, this method is not the same relative
valuation method. Because of China's share issue is to set a standard
price-earnings ratio, ignoring the same industry, the same comparison
between enterprises, even in many cases, is a price-earnings ratio for
all enterprises to adopt the standard, and emphasized that the
relative valuations of comparable companies and comparison. As China's
stock market is different from the mature Western markets, the
relative valuations in the Chinese Stock Market also needs to consider
the following issues:
1, the relative valuations of comparable companies implied stock price
has been accurate assumption, that is, assuming the stock markets are
efficient. If the existing stock market is not efficient, enterprises
are not exactly comparable pricing, valuation of businesses were not
being accurately priced. Therefore, the relative valuation method may
only be a reference to market pricing, while not discounting the
intrinsic value of the stock real.
2, in practice, there can be various situations of the two companies
are identical. In China, the company sub-sector within the Mixed data
disclose more and less, the industry benchmark is difficult to obtain,
understand the industry position and financial situation of the
company's comparative analysis of horizontal difficult to choose which
is more comparable large the difficulty of the enterprise.
3, the Chinese stock market and the non-market factors that increase
the complexity of the choice of comparable companies difficult.
China's stock market speculation thicker atmosphere, the listed
company's risk behavior mixed with the Government, local color and
Institutional Change. Even if the same trades, because the place of
business is different from the difference between ownership structure
will lead to large differences between the two companies.
In summary, the relative valuations in the Chinese stock market
inefficiency in the market and comparable companies is difficult to
determine, it is difficult to estimate accurately, but because of the
relative valuation method has a strong practical, we are still
regarded as a good price reference. Second, the absolute valuation
Mainly in the absolute valuation is mainly based on the intrinsic
value of the stock. Determine the intrinsic value of the stock in the
company's future profitability depends on the intrinsic value of
profitability and the corresponding cost of equity capital.
Discounted cash flow valuation method estimates the intrinsic value of
the stock, it is universal for the stock market. But the truth is,
some researchers are having trouble using this model. Because the use
of the model needs to estimate the three variables, namely, cash flow,
discount rate and growth rate.
Main methods including discounted cash flow (DCF), dividend discount
method (DDM).
A discounted cash flow method.
Discount rate by a certain company's overall value to a method of
stock valuation. Calculated as follows:
1) measuring the company's future cash flows. This forecast is
premised on the successful IPO to raise the necessary cash and apply
to the relevant investment. Of the forecast period is generally 5 - 10
years, the longer the forecast period, the worse the accuracy of the
2) forecast the company's sustainable value. Sustainable value is the
company forecasts the end of the market value of the book can refer to
the company's residual value and earnings at the time, select the
appropriate multiple of the industry average price-earnings ratio or
book value estimate.
3) Calculate the weighted average cost of capital. WACC = ¦²Ki * bi,
where WACC is the weighted average cost of capital; Ki for the single
cost of capital; bi is the proportion of the individual capital.
4) Calculate the company's overall value. The company's overall value
= ¦²FCFt / (1 + WACC) t + Vn / (1 + WACC) n. Where FCFt each of the
cash flow for the enterprise; Vn as n times the final value of the
target company.
5) the equity value. Equity Value = company's overall value - the
value of net debt.
6) The value of the stock per share. Stock value per share = Equity
value / total issued share capital.
Can be more reliable using discounted estimated future cash flows,
cash flow or dividends under both the risk characteristics can be
determined to give the appropriate discount rate. However, some
conditions are not applicable:
1) the company into a financial crisis. This company does not write a
positive cash flow, or difficult to accurately estimate the cash flow.
2) the distribution of income cyclical companies. These companies on
the estimated future cash flows likely have a greater deviation.
3) the ongoing restructuring of the company. These companies may face
asset structure, capital structure and dividend policy and other
aspects of the larger changes in both affect the future cash flows,
but also through the company's discount rate risk characteristics of
the change, thus affecting the results of the valuation.
4) has some special assets of the company. Mainly refers to a large
number of assets that's not being used, patent or option assets of the
company. The value of these assets can not be fully reflected in the
company's cash flow.
2 dividend discount method.
Assuming constant dividends for the D, the discount rate (the market
can accept the necessary yield) as r, the n value of the gains in the
price V: V = D / (1 + r) + D / (1 + r) 2 + ? ? + D / (1 + r) n or n
sufficiently large and we believe that approaches infinity, the
formula is simplified as: V = D / r in this model, we must not only
determine the value of the parameter, but also to assume that the
dividend is fixed, in practice, it is difficult to happen. This model
also includes the following variants:
(1) constant growth model (Constant growth model): When the dividend
to an annual increase rate of g, then the dividend change is Dn = D (1
+ g) n, the value is calculated as: V = D / (rg)
(2) Variable Growth Model (Multiple growth model): When the dividend
change from D1 to D2, D3, ? gradually from the beginning to the
stability of the volatility is expected to m years later, as the
company's growth and maturity, dividend distribution becomes constant
or constant growth mode, then the model becomes: V = D1 / (1 + r) + D2
/ (1 + r) 2 + ? Dm / (1 + r) m + Pm / (1 + r) m, (Pm m represents the
price of the stock.)
Basic principle of the dividend discount model is the stock price
equal to the sum of the present value of expected dividends. The model
is based on a specific company's own growth and the valuation of
expected future cash flows, so the error will not be affected by the
The model is expected given the recent gains and dividends to the
larger weight given to long-term gains and dividends less weight. And
also more difficult to determine the parameters, we will never be able
to determine any one parameter estimate is correct, because each
parameter depends on other parameters.
Valuation of the quality of the stock value will eventually take on
the quality of information available, and the quality of information
received depends on whether the market is cost effective and limit
access to information.
Dividend discount model requires a listed company in the distribution
rate of dividends, and dividend growth rate needed to make
predictions, listed companies in China to send is not the norm, and
the distribution of cash dividends the amount of cash the company is
also limited. And even if the dividends of shares of the company, but
also mainly in the form of stock dividend payment, which made a cash
dividend discount model based on loss of the basis for valuation.
Therefore, the lack of models of the required variables, if any, is
difficult to estimate, and the theoretical basis of the dividend
discount model is to have a fully effective market presence,
apparently China is still unable to meet this requirement, it is
inevitable bias.
1, the discount rate is concerned, need to CAPM model, but at present
in China's stock market has no real sense of the market risk-free
interest rate, therefore, determine the risk-free interest rate with a
lot of human factors, from the whole market the investment climate,
the market rate of return investors demand is not the market rate of
return in the end there is a big question is, thicker atmosphere
because of market speculation, investors are not too concerned about
the company's business. And the real growth rate of listed companies
from the point of view, the stock market returns is that most listed
companies is difficult to achieve.
2, for cash flow and growth rates, in the dividend discount model, the
distribution of China's listed companies is not a universal phenomenon
of cash dividends. Cash dividends in the dividend distribution plays
an important role, and then about financing behavior of listed
companies to become an important factor in dividend policy, even if
the listed companies do not clearly long-term and stable dividend
policy. Free cash flow discount model for equity and corporate free
cash flow discount model, the first because of China's listed
companies are newly formed, time to market and relatively short
operating history, large number of listed companies in recent years to
restructure, cash flow is unstable; the second is accounting and
auditing systems, and inadequate information disclosure of listed
companies, the frequent changes in accounting methods, profit
manipulation seriously, which makes cash flow and growth is difficult
to accurately estimate; third is a listed company behind the
government manipulation of behavior and behavior of large shareholders
are more policy uncertainty and random fluctuation of operating
results makes. These have resulted in estimated cash flows and growth
Dividend discount method and discounted cash flow method discounted
cash flow are common methods. In the use of discounted cash flow
method to take into account when pricing their applicability. In
general, the pricing of the company to be more reliable future cash
flows estimated at the same time, according to the risk
characteristics and cash flow to determine the appropriate discount
rate, then using this method is more appropriate. Many cases,
inappropriate use this method or the need for appropriate adjustments.
Discounted cash flow model should be mainly applied in the traditional
industries, a longer operating history, solid operating results the
company valuation, and in the valuation, for the discount rate
calculation and adjustment of accounting numbers also using reasonable
Comparison of Valuation Models
Model valuation principles apply to specific types of limited scope or
Absolute discounted expected dividend dividend discount valuation is a
measure of the intrinsic value of assets; for the strong interest in
the stability of the conditions required for asset pricing more
accurate assessment of the appropriate conditions are very difficult;
to have the nature of the asset pricing options are limited
Discounting the expected cash flows discounted cash flow
In an efficient market price-earnings ratio relative valuation, the
arbitrage makes the relationship between the value of comparable
companies tend to balance the intrinsic value implied by the market
pricing conditions required greater impact bias, difficult to obtain
comparable companies
Book value
IPO Pricing Valuation
IPO in the stock valuation and pricing to determine both the rational
and more emotional judgments on market supply and demand. Practical
operation, the pricing of art more reflected in the operating process.
Before the lead underwriter in pricing, we must first determine the
appropriate market timing, because in the case of inappropriate
distribution, may be long-term harm to the reputation of the
discoverer of the market, thereby limiting the issuer's future
financing options.
Secondly, we must attach great importance to the pricing process of
communication. IPO's lead underwriter and institutional investors to
continue to engage in direct communication. In this communication, the
lead underwriter of professional investors can ascertain the interest
and concerns so as to valuation, pricing, fully prepared to do.
Under normal circumstances, IPO pricing is low. This is the IPO
underpricing phenomenon in the last article, we will conduct a
detailed description of the problem. However, the underwriters if the
offering price down too much, making the IPO issue price and the stock
after a certain period showed very different from the true price, then
the reputation of the underwriters of the future will be adversely
affected, thereby reducing the market share of underwriters to reduce
the future business income. With the irreversible nature of the
reputation of underwriters attach great importance to the reputation
by maintaining the value to increase their market share and ensure
future earnings. Therefore, the performance of the pricing process
more as a multi-party game.
IPO institutional investors should be through the inquiry to a
specific way of determining the issue price of the stock. Issuer and
its main consignee shall publish initial public offering prospectus
and issue a notice to the inquiry objects to promote and inquiry, and
through the Internet to promote public investors.
Consignee when the inquiry should be provided to the inquiry objects
investment value study report. Investment value study report shall
affect the investment value on a comprehensive analysis of the
factors, competition for resources to provide issuers and market
competition situation, the use of industry accepted valuation method
the issuer's reasonable investment value of stock forecasts.
Inquiry into the initial inquiry and accumulated bidding inquiry.
Issuer and its main consignee shall determine the initial inquiry,
issued by price range, the offering price range determined by
aggregate issue price of bidding inquiry.
Preliminary inquiry and accumulated difference between the tender
inquiry in the following areas:
1, the number of objects involved in the inquiry may be different: the
object of a preliminary inquiry for the issuer and the sponsor
companies to choose the conditions in line with institutional
investors inquiry object (at least 20), but not all, qualified
institutional investors. The total bid to participate in the object of
inquiry to all qualified institutional investors.
2, involved in inquiry in different ways: in the preliminary inquiry
stage, an institutional investor can only participate as the object of
a preliminary inquiry inquiry; in the book-building phase, involved
the placing of the inquiry and institutional investors can themselves
(own account), it can be managed investment products of their
accounts, but the inquiry prior to the account object must be reported
to regulatory authorities for the record.
3, whether paid subscription fund and participate in a placement.
Institutional investors participate in the initial inquiry without
payment, if it does not participate in bookbuilding inquiry, it will
not get a placement; participation of institutional investors
accumulated bidding inquiry subscription fund to be paid in full,
purchase the above issue price will be given proportion.
IPO underpricing (IPO under pricing) is the existence of IPO
Underpricing in pricing, that IPO shares priced at less than market
value, the performance was significantly lower than the IPO price of
IPO first day closing price, listed on the first day can be
significantly excess returns.
IPO underpricing (IPO under pricing rate) reflects the IPO price to be
underestimated the extent of IPO first day can be used to measure the
rate of return, namely: RAWR = (P1-P0) / P0
Which, RAWR is underpricing, P1 is the first day of IPO transaction
price or closing price, P0 the price for the IPO.
IPO underpricing is the IPO price is reasonable measure of the
importance of indicators. If the IPO underpricing is less than 0, that
is, below the IPO issue price on the first day, indicating that IPO
pricing is too high; if the IPO underpricing was significantly greater
than 0, that is listed on the first day to get a significant excess
rate of return, which shows There underestimated the pricing of new
IPO underpricing on the research question includes two aspects: First,
the phenomenon of IPO underpricing research; the second is to explain
IPO underpricing research.
Theoretically, in an efficient market, the lower the information
asymmetry, and the issue price is determined in accordance with market
demand, the first day IPO price should not be significantly higher
than the long-term issue price. However, foreign research and practice
show that, IPO underpricing is a common long-term phenomenon. Numerous
studies also found that: the mature markets of underpricing of new
shares in emerging markets have less than underpricing, suggesting
that the mature markets of the IPO price closer to market prices.
IPO underpricing in China's high rate of the company, maintained at
100%. The way of market-oriented reform issue has not changed the
Analysis of IPO underpricing
IPO underpricing phenomenon is not only academics, but also is a
concern of practitioners. They explain the phenomenon of IPO
underpricing for a long and unremitting efforts, a variety of
theoretical explanation, summarized in the following factors:
1, asymmetric information on the impact of IPO underpricing
In reality IPO, the issuer, underwriters and investors for the issue
of management of the operating level, funding projects earnings
outlook, a market demand for new shares information such as price and
quantity are not the same mastery. Information asymmetry between
market players pricing of the IPO from the following four aspects:
(1) the issuer and investor information asymmetry on the pricing of
Selling new shares issued by the Company in its future prospects, such
as the expansion of the market rate, the future profitability of
investment projects and so on, rather than machines, factories and
other fixed assets, the expectations for the future is difficult to
judge correctly. Because the real world of information collection and
analysis needs of higher costs, investors, especially retail investors
to spend time, energy and money to understand the real situation of
each issuing company is worth the candle. Therefore, compared with
issuers, investors in the information disadvantage. When the
application varies greatly between companies issuing new shares,
investors can not tell which issue is the quality of the company,
which is bad company. Since the existence of adverse selection, the
results at lower prices investors are only willing to purchase all
shares of IPO companies, so that price is lower than IPO price at the
time symmetric information.
(2) the issuer and the underwriters of information asymmetry on the
pricing of new issue
In the issue of new shares, investors demand on the stock number and
price information is very important to master degree. Since issuers
are not familiar with the capital markets generally, and the
underwriters accumulated a wealth of market experience, and has a
broad customer base and sources of information in this regard than the
issuer has an advantage, both on the issue of new shares the market
demand information master asymmetry. Therefore, the issuer must rely
on the pricing of new shares the underwriters. Issuers on the capital
market the lower the degree of familiarity, the more determined to
rely on IPO underwriters the right price. However, the underwriters
and the conflict of interest between underwriters. The highest price
the issuer would like to issue new shares to part of the company in
transferring control of the situation as much as possible to raise
funds, and underwriters want to be able to successfully issue new
shares to raise the reputation and gain revenue. If the IPO price is
too high, on the one hand there is the possibility of failure issue,
the reputation of underwriters adverse impact, even if successful
issue, purchase price was too high to make the reduction, which will
affect the reputation of the underwriters; the other hand, Pricing too
high will be its main customer dissatisfaction, due to the
underwriters to the issue only occurs between the big deal this time,
new issues, and among these institutional investors are long-term
transactions, the underwriters which they are bargaining with the
issuer and the counter-offer an important weight. Therefore, lowering
the issue price of the underwriters intends to give investors more
benefits, but between the underwriters and the issuer's demand for the
IPO information asymmetry, the issuer can not effectively monitor the
underwriters of such acts, and finally to IPO priced at less than the
equilibrium price.
(3) information asymmetry underwriters and investors in the pricing of
the IPO
Underwriters for the IPO pricing dependent on the demand for the IPO
of its judgments, and judgments based primarily on the investors of
new shares from the subscription price and demand report. But whether
investors will own the real judge told the underwriters, is a
deliberately low prices or investors to judge the value investor, the
underwriter does not know exactly, in this regard, underwriters and
investors, information is not between symmetry. Thus, the underwriters
will through a mechanism to ensure the offer is a true reflection of
investor demand. Typically, investors can be divided into two
categories, one can call regular investors, the underwriters of its
features is to maintain good long-term relationship, often to the
underwriters to subscribe for new shares, and holds a longer time is
not a listing of new shares to sell profit-taking. Is a typical
investment funds, insurance funds and other institutional investors
based. The other is occasional investors, and underwriters of its
features do not exist between the long-term customer relationships,
and shares held indefinite period of time, typically a general retail
investors. Underwriters for IPO pricing was based primarily on price
of regular reporting of investors. As investors, underwriters and
regular multi-stage game between a relationship in the future to
ensure that regular investors to report the real demand, the
underwriters at the IPO price below the market price must be
appropriate to ensure that regular investors certain profit margins,
or recurrent interested investors will tend to depress quotations.
Therefore, underwriters and investors, asymmetric information also
leads to the existence of IPO underpricing.
(4) institutional investors and retail investors of information
asymmetry on the pricing of IPO
In the IPO market, different investors on the issue of differences in
the level of understanding of people. Institutional investors,
financial strength, strong research force, and the good relationship
between the underwriters, issuers can be more detailed, real
information, and general retail investors not have such advantages.
Therefore, institutional investors and retail investors to grasp the
situation of the issuer information asymmetry. In this way,
institutional investors than retail investors to distinguish more
accurately what the company is undervalued, so the main issue of the
shares of these companies purchase as little as possible the stock
overvalued purchase; and retail investors as sources of information
restrictions, can not determine which company's stock is undervalued,
did not focus on the purchase of new shares. The end result is the
institutional investors get most of the new shares in the stock price
undervalued or moderate, and most stocks are overvalued for retail
investors. In this case, in order to attract retail investors to
participate in subscription of new shares, the issuer must reduce the
average issue price of the stock to ensure that retail investors even
after the purchase of the stock market has some room for profit. Thus,
different results of asymmetric information between investors also led
to the existence of IPO underpricing.
In short, the IPO market existed among the participants of the main
problems of asymmetric information, leading to the IPO price is lower
than market price, while the magnitude of underpricing and the entire
stock market and distribution company are related to the degree of
information asymmetry.
2, the pricing of IPO underpricing have a significant impact
Foreign scholars found that the pricing issue and underpricing has a
strong correlation. Different pricing methods have led to underpricing
significantly, specifically: pricing a fixed price underpricing was
significantly higher than book building method underpricing, but the
former is far less than the cost of the latter; auction pricing under
the IPO underpricing is much lower than the total bid price and fixed
price method underpricing.
3, issue size of the impact of IPO underpricing
In general, an initial public offering of shares of companies only
account for part of its total shares. System results from the foreign
point of view, the proportion of outstanding shares lower, IPO
underpricing the higher the degree. Foreign scholars to explain this
phenomenon is: the lower the proportion of outstanding shares, then
the non-tradable shares held by insiders may be the higher proportion,
while the interests and business interests within the higher the
degree of consistency, which makes people work harder within the to
run good business. Therefore, outside investors are more willing to
pay a higher price. By extension, the total share capital in the
business conditions change, the issue of large-scale enterprises
underpricing issue size should be smaller than the underpricing of
enterprises is low.
4, the underwriters on the IPO underpricing of
Underwriters on the IPO underpricing is mainly reflected in the rate
of two aspects: the underwriters, the pursuit of success and increase
its visibility IPO is often more important than profit, so the
underwriters intends to release some of the better underpricing shares
to to attract more investors, leading to higher underpricing. For
investors, they are more willing to buy a higher reputation
underwriters are underwriting the stock because they believe that
higher prestige underwriters in order to maintain its reputation, the
stock will have a more stringent underwriting risk control, which
leads to The lower risk of underwriting stocks advance. Thus,
investors are willing to buy stocks higher offering price, resulting
in lower underpricing. However, some scholars of the 20th century, the
United States 90 years of data study found that high reputation
investment banks underwriting the IPO underpricing rate higher.
5, the liquidity needs of the underpricing of IPO
After the stock market need to maintain a certain degree of liquidity
to help maintain their price discovery and liquidity needs of a large
number of investors trading the stock can be achieved. Therefore, the
issuer may be interested in lowering the issue price of new shares to
create excess demand for the stock to attract investors in the stock
market after the purchase of the shares in the secondary market to
enhance the liquidity of the stock.
6, advertising and market timing on the rate of IPO underpricing
Foreign scholars have found strong advocacy on the stock IPO can often
increase the chance of success. During the Internet bubble in the
United States, investment banks and the media hype on the Internet in
emerging enterprises, these enterprises can be issued at high prices
and record high on the secondary market is an important reason. The
market environment, market sentiment changes in market factors such as
impact of IPO underpricing is another important factor. Good times
when the market environment, IPO underpricing is higher than the
market environment is poor in case of IPO underpricing. In addition,
macroeconomic factors also significantly affect IPO underpricing.
7, issue additional shares to prepare for man-made
After the success of the company issued new shares after a period of
operation, due to the continuous expansion of business scale,
financing needs will be produced again. Shareholders of listed
companies can issue options to the old (allotment) or issue new shares
to the public. As a secondary offering, investors will refer to the
first issue of the situation. If the price is too high when first
issued, the stock market lower after the increase, or even below the
issue price, investors will have the company's secondary offering of
no confidence in feeling, is not conducive to the issuer's subsequent
financing. Therefore, awareness of the issuer may be issued in the
first issue of the time at a lower price available to investors so
that investors are satisfied with the report, in preparation for the
The Evolution of China's IPO pricing
The development of China's securities market has experienced the past
ten years from scratch and only thing. But the short period of ten
years, the Chinese way of pricing the IPO has gone through a series of
complex evolution.
A fixed-price stage
Established securities market in 1990, before the majority of our
shares issued at par. Such as Vanke A, North Hi-Tech, Shen Baoan
other, pricing is no system to follow. Established securities market
early in the number of shares issued, issue price and the
price-earnings ratio is totally no autonomy, largely determined by the
Commission, but in practice is the main way of pricing a fixed price.
2 short online bidding phase
Since 1994, China carried out reform of the pricing issue, and in June
1994 to January 1995 during the implementation of online auction
issue, that prior to the issue by the underwriter and the issuer
within the limits prescribed in the country, according to negotiated
price-earnings ratio method IPO price. At that time there have been
ha-year-old treasure, Qinghai, three general, Xiamen Overseas Chinese
Electronics and Joan of gold, with the four companies, even though the
Kazakhstan-year-old treasure, Qinghai, three general, Xiamen Overseas
Chinese Electronic reserve price higher than 38%, respectively, 167%
and 141 % of the price of the sale of all shares listed on the first
day but fell below the issue price. Joan of gold, only 47.3% of the
shares issued out of the rest underwritten by the lead underwriter. In
view of this, the February 1995 issue of the Commission to cancel the
Price-earnings ratio relative to the fixed stage 3
During this time, IPO pricing method with a relatively fixed
price-earnings ratio, that is the issue price of new shares per share
under the after-tax corporate profits and a relatively fixed
price-earnings ratio to determine. The general level of price-earnings
ratio set at 12 to 15 times and 15 times the upper limit. Way of
issuing and distribution of the stock prices of the administration
with a clear color, distribution and secondary market, the average
price-earnings ratio price-earnings ratio out of line, causing the
stock issue price and secondary market trading price of the great
differences between the new shares are listed on the same day 50% 150%
of the increase.
Stage 4 total bid price
July 1, 1999 "Securities Act" into effect, that the price
mechanism in the securities market in China to market on a major step
forward. "Securities Act" Twenty-three states: a securities
company underwrites securities, the issuer shall be entered into with
affiliates or the underwriting agreement, set out consignment, the
types of securities underwriting, quantity, amount and issue price;
the twenty-eighth Article: stock is issued issued at a premium, the
issue price by the issuer and the underwriting of securities companies
negotiated by the State Council securities regulatory authority. After
"on the way to further improve the notification of stock
issuance" under Article VI, "the issue price of the stock
may take the following methods: 1. Issuing company and the
underwriters may make a price range, at the Commission for approval;
2. By holding Placing an object such as referral question and answer
session, to understand the object placement subscription will
determine the final issue price; 3. the final offering price to be
approved by the SFC to determine the price range (including minimum
prices and maximum price range), the final issue price determined
outside the price range, must be submitted to the Commission
From the "notice" can be seen, beyond the issue of IPO
pricing range of inquiry can be, but beyond the specific scope of the
amount specified is not done. June 19, 2000 online issue of pricing,
"Ningbo Bird" and "Chengzhigufen" is first used
under the net price cap open inquiry and the two stocks. "Ningbo
Bird" wrote in the prospectus, "The total amount of not less
than 4,000 shares issued, issue price floor is 8.28 yuan / share. The
issue of subscription by institutional investors make an appointment
and taking into account the total demand for funds raised to determine
the final issue price and the final total number of shares issued
"to finalize the issue price of 16.00 yuan. After that, the IPO
price earnings ratio begun to break the traditional limits, road shows
and to institutional investors to take the issue of inquiry method,
the price is only set the reserve price, no limit. The result of
operation of the market price-earnings ratio is a substantial increase
in new issues. Fujian Electric Power IPOs in 2000 went so far as to
88.69 times earnings hit record, and its plans to raise 470 million
yuan of funds and actual funds raised goes to 1.15 billion.
Implementation of a strong book-market pricing, the initial intention
is to issue new shares at high prices, so that the subscription of new
shares to reduce profit opportunities, forcing some level of diversion
of funds into the secondary market purchase, market, reducing the
volatility of the secondary market, which is conducive to the stable
development of the stock market. However, in practice, although the
market price of the IPO to some extent to curb some speculation in
stocks, but the market-oriented reforms had not achieved the expected
results, with costs, the market for a higher price speculation, one,
two market price level is still a huge difference. IPO in 2000 the top
10 stock price-earnings ratio, the average premium of 134% over the
first day of a huge rate of return that a lot of money still gathered
in the primary market.
Control the price-earnings ratio price stage 5

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