Abstract: IPO reform brought by the "three high" phenomenon, namely high issue price, high price-earnings ratio, superb raised funds and shares break, not only damages the interests of investors in the secondary market, but also contrary to the law of market value, undermining the the stock's intrinsic price order. Based on the IPO pricing factors were analyzed, obtained frequently break new stage of China's IPO pricing mechanism is mainly caused by the irrational, and for this proposed corresponding reform proposals.
Keywords: shares break new pricing method factors.
A research background.
IPO on the stock market over the years is one of the most talked about topics In 1963, the U.S. Securities and Exchange Commission first proposed IPO underpricing problem. Subsequently, a large number of scholars on IPO underpricing problem is studied. Related studies show that in the whole Almost all of the world stock market there are different degrees of IPO underpricing phenomenon in China's capital market development, IPO pricing is always high underpricing prominent exception, shares had the highest first-day gain of 800%, and fresh below the issue price on the first day there is a case to become a great spectacle .2010 stock market since shares break to occur. especially GEM "three high" --- high issue price, high price-earnings ratio, superb fund-raising gold shares break massive strikes, breaking the "shares undefeated" myth --- dozen new investors in the primary market can get excess returns. IPO pricing is too high or too low will produce a bad effect: IPO overpricing reducing the stock in the secondary market profit margins, especially in the case of shares frequently break, investors out of high issue price under the high awareness of the risks will break cautious investment attitude which may cause the subscription amount less than the severe cases, there may even result in a serious shortage of the subscription amount, resulting in the issue failed. Additionally, if the IPO price is too high causing a listing on the break, and this will affect the confidence of investors, if investors choose to exit, then turn trigger price fell further, is not conducive to the company establish a good image of the capital market, which the company's future refinancing activities and adversely affect the formation of sustainable development. Conversely, if the IPO pricing level is low, it is clear that the issuer will lose the benefit of the company's value is not fully recognized by the market, the issuer financing scale will be affected. The high IPO underpricing or the first day of break from what what for? Final analysis, is the stock market caused by the irrational pricing mechanism. Therefore, the study IPO pricing mechanism for the development of China's securities market and the healthy operation of the national economy has particularly important significance.
2 new pricing measure.
2.1 IPO pricing method.
IPO pricing in the global market the main ways including fixed price mechanism, the auction mechanism, the cumulative orders over tendering mechanism and various combinations to form a hybrid approach.
2.1.1 In the fixed price distribution method, investors know in advance a fixed price issue of securities investors in the prospectus within the time specified, fill and sign the subscription, and then submit them to underwriters and investors purchase sheet submitted , you must put the number corresponding to the demand for the stock funds into account the underwriters in the purchase after the end of the collection period, equity investors will be allocated proportionally between. shares issued in accordance with the total number of investors be distributed until all the stock already been assigned.
2.1.2 The auction mechanism is to allow individual investors to determine the price of the auction. Basic principle is the highest bidder the bid, all of the winning bidder will get the lowest price to buy.
2.1.3 bookbuilding pricing refers to the IPO prospectus uncertain issue price, issue price of new shares under the final cumulative voting online and offline purchase the quantity and size from the issuers and underwriters determine the IPO issue price and issue number.
2.2 Comparison of Methods IPO pricing.
Pricing efficiency refers to the issue of new shares reflect a company's true value, but also to some extent reflects the market affected by the market demand. Underpricing is too high or the first day of break IPO pricing are considered invalid and therefore, pricing efficiency is generally measured through underpricing according to the basic principles of market pricing, the stock price is the result of the convergence of information supply and demand sides, therefore, the stock pricing differences mainly in the stock price way of communicating party information and communication level, and the resulting the degree of information asymmetry generated.
At different price mechanisms involved in pricing the position of the main interests of the game are different.
2.2.1 Chief of the fixed-price mechanism, the regulatory agencies dominate in the market of fixed-price mechanism, the issuer dominant. A pre-determined number of the issue price and the issue is regulatory body or issuer and its underwriters sole discretion, between the issuer and the investor may have information asymmetry and produce high IPO underpricing.
2.2.2 in the auction mechanism, the investment in accordance with the information provided by the issuer to make a purchase. Investors in a dominant position, pricing is a fully market-oriented process, the issue price is usually located in the market-clearing level or slightly lower than the market clearing level, pricing for maximum efficiency. Meanwhile, in order to bid, investors may try to raise its offer, It also makes the auction mechanism underpricing a minimum.
2.2.3 Cumulative Orders bidding mechanism, the pricing basis for the establishment of the issuer or underwriter in investor demand for information, and determine the value of the stock above, relative to the fixed price mechanism, its pricing is more effective, but , due to the issue price of new shares by underwriters based on sensitivity to changes in demand for discretionary and may therefore reflect only part of the inquiry involved the information provided to investors, therefore, auctions pricing mechanism more efficient than the cumulative order bid pricing mechanism efficiency, while the cumulative order bid pricing mechanism more efficient than fixed-price mechanism pricing efficiency, underpricing are also usually at an intermediate level.Links to free download http://eng.hi138.com
3 Analysis of factors affecting IPO pricing.
Factors that affect IPO pricing is very complex. Specifically from the company's intrinsic value, the number of new shares issued, the IPO price-earnings ratio, macro-economic climate and the reputation of investment banks and other aspects to analyze.
3.1 company's intrinsic value.
The issue price of new shares is the manifestation of the intrinsic value of the company the company's intrinsic value is the company's future to give investors the present value of cash inflows and it is the company's investors and potential investors in the company of an expectation value , is the basis of the stock offering price.
Stock pricing process is carried out in the stock value estimates, based on the estimated value of the formation of a price range, and then in the secondary market, according to market supply and demand to the price range of the market can become an acceptable price point.
3.2 IPO price-earnings ratio.
Usually higher earnings release for investors, meaning that the company's future profitability growth have high expectations, so the higher the IPO price-earnings ratio, the issue of the greater degree of underpricing, but the internal structure of China's stock market price-earnings ratio a huge difference in earnings performance characteristics, size characteristics, industry characteristics is very obvious, but there is the Chinese stock market non-tradable shares, it can not with other countries PER horizontal comparison. Chinese authorities controlled by the earnings release, high-quality corporate earnings are one size fits all regulation generally down, the intrinsic value and the issue price deviates, so after the listing has a higher rate of return, while the inferior enterprise itself is relatively high, but because of information asymmetry can not effectively distinguish among investors and stock market demand and other factors, its With the price was artificially inflated as other high-quality companies.
3.3 macro-economic climate.
Fundamentally speaking, the country's economic development situation and on the country's economic development has an important impact on a number of factors will have a significant role in the pricing of shares occurs, therefore, faced with its macroeconomic impact analysis, which is of great significance. Macroeconomic cycle changes, or changes in the economy. economic cycles including recession, crisis, recovery and prosperity in four stages. Generally, during the recession, investor psychology would be more cautious, the subscribed shares the enthusiasm is not high, the listed companies in order to attract investors, a lot of funding, it will issue price, to times of crisis, the share price fell to the lowest point, and the beginning of economic recovery, investors' enthusiasm is high, then high release also able to raise a lot of funds, to prosperity, the stock price rose to the highest point.
3.4 Investment Bank's reputation.
Investment banks as underwriters of the stock, is linked bond issuers and investors. Investment bank reputation also affect the quality of the issue price is an important factor. Investment bank's reputation to provide investors with information about the signal quality of listed companies. Investment The higher the bank's reputation, indicating that they better the quality of the underwriting of stocks, investors lower risk stocks, investors IPO pricing will not be low. Conversely, low investment bank's reputation, investors do not will be subscribed, the pricing of shares naturally low.
Through the IPO pricing factors influencing factors and their impact on the IPO pricing analysis, we can determine a reasonable price for the new shares issued, so that China's IPO pricing mechanism more reasonable.
First, the issue price of new shares is determined by the intrinsic value of the company, the issue price greater degree out of its intrinsic value, high-priced issue, would inevitably lead to the phenomenon of shares break, so that investors lose confidence in listed companies, listed companies is not conducive to smooth financing and rapid development. Consequently, the development of listed companies can not deviate too much from the issue price when the stock's intrinsic value.
Secondly, the factors that can affect the IPO pricing Although many. Should first consider the issue of the company's profitability, the listed company's industry average market price-earnings ratio and other major factors to determine its approximate the secondary market positioning.
Finally, the IPO has more uncertainty, China's stock market is also in a continuous adjustment, ever-changing environment, the Chinese stock market in an economic environment but also its indispensable an important factor.
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