PE Embarrassment Under GEM

　　 "When we were working as a dollar fund, our internal investment rule was that the investment cost should be less than 8 times the P/E ratio before we could invest. However, after the GEM was launched, its average issuance P/E ratio of nearly 100 times also made the equity investment market crazy, and asset prices continued to rise. We should also follow the market. The internal investment rule mentioned 12 times the P/E ratio, which has given us a headache. But The market is still rising. If the price earnings ratio reaches 18 times, it is estimated that we can't continue in this industry. " The partner of a PE company sighed with this reporter.

PE and VC just put down their GEM toasts, and then fell into a new dilemma, the market stepped from cold to hot. The high P/E ratio of the GEM has completely broken the original pricing model of the primary market, and the prices of invested projects are rising. In order to compete for the project, some institutions even paid a deposit without talking about conditions. A group of unprofessional PE who are willing to pay high prices and ignore risks have won many times at the negotiation table of enterprises.

This scene can not help but remind people of the wave of nationwide VC (venture capital) craze in 2000. The difference is that this GEM was finally launched, but only a small part of it could be sold at a high price through secondary market IPO. Therefore, in this wave of PE craze, perhaps a large number of VC will still fall down like a decade ago.

During our reporter's visit, many PEs and VCs talked to our reporter about their helplessness and worries about the current market situation and risks, the obstacles to the listing of PE projects, and the fierce capital wars.

Asset prices soared

Several PE and VC personages described to our reporter the price evolution of the first tier market of the GEM.

"In the second half of last year, under normal circumstances, the P/E ratio of the project was about 8 to 10 times. After the GEM was launched, the market price began to rise from about November last year. Until March and April this year, the market was somewhat unexpectedly hot, and there were not a few institutions that invested 15 times or 20 times the P/E ratio."

　　 "We started to contact an enterprise in the first half of last year. The time point was good at that time, and no one was competing with us. We initially reached an investment price of about 8 times with the enterprise. However, after the GEM came out, the market became obviously hot, and institutions often came to talk with the enterprise. At the beginning of this year, some institutions were willing to invest in this enterprise with a price earnings ratio of 20 times. Fortunately, because I was recognized With the help we have provided in the past year, the enterprise has finally respected the agreements reached in the past that have no legal effect. But this is just a case. Another company that we also think is good was robbed by other organizations. "

　　 "I have experienced the speed of a senior organization competing for the project. I wanted to see the project together, but they had already remitted the money to the enterprise's account first. When I saw the framework agreement they signed with the enterprise, I was somewhat surprised. There was almost nothing in the agreement, including how much money was invested and how many shares were accounted for. It was because I paid the deposit, you must supply the goods to me. Now This is also true! "

　　 "Now, whenever you meet an enterprise, you should never mention to me the investment price below 20 times, at least 30 times or 40 times, before we can start talking about this investment. Some time ago, a company in the field of financial information and we said that they wanted to raise funds. At that time, the listing price of EastFortune in the industry reached 100 times the P/E ratio. I said, 'How much do you want?' He said, 'Why 30 times', I said, 'You can find someone else'. "

It can be seen that the popularity of the GEM has made the business owners in the primary market unconsciously increase their psychological expectations, and the price code during negotiations has doubled. "Now many enterprises like to use the P/E ratio of listed enterprises in the industry to talk, but in fact, from the perspective of investors, under the environment of China's issuance system, enterprises can not be so priced without being listed. We have made a progress now, that is, there is hope for listing, but the actual supervision is too powerful. Today we say that this can be listed, tomorrow we say that that can be listed, and what on earth can be listed The city is hard to say. Therefore, the pricing of Chinese enterprises is not continuous. As a simple model, the biggest uncertainty here is the discount rate. If the time is uncertain, the discount rate is not legal. And there is no legal multiple. If the enterprise can never go to the market, twice as much is expensive. "

"However, the high market price will not be a continuous phenomenon. First, there is a sign that the price earnings ratio of GEM enterprises has gone down. Second, the CSRC has paid more attention to the fundamentals and long-term development of enterprises, and the future growth of enterprises is more important. Therefore, the future market will tend to return to rational prices."

Difficulty in listing

　　 "Everyone is going to the GEM, and PE is very risky. Because if we add up the projects that PE has invested in now, it is impossible. Can the CSRC allow so many projects to be listed? Investors may be able to bet on several listings, but after listing, it is now 100 times the P/E ratio. How many times will it be when it exits three years later? It is hard to say. But can other unlisted companies still exit? What is the exit P/E ratio? It's completely unknown. "

In fact, many enterprises with good quality or good growth are stuck in some hard wounds before going public.

The first is the recent industry guidance issued by the CSRC. A number of enterprises that had hoped to be listed on the GEM have entered the industry recommended prudently in a strict sense.

　　 "The policy has completely changed. What we are talking about is" two high and six new ". Now it is one of the nine encouraged industries and eight restricted industries. The hotel chain like Home Inn used to be called an emerging service industry, but now it is actually a general traditional industry, which is nothing more than adding a hotel chain. Therefore, the encouraged industry does not exist. Instead, it appears in the restricted industry. For example, it was launched last year If Toread now goes to apply for materials, the CSRC will certainly not accept it because it does not comply with the industry guidelines. " An investment banker and our reporter analyzed.

"This is also a blow to chain consumer enterprises. Because sponsors act cautiously, they rarely recommend such projects to the GEM. Therefore, for such enterprises, they can only consider expanding their chain business and striving to be listed on the main board."

Second, the ownership structure formed in the historical evolution is not standardized, and some previous actions of investment institutions unintentionally blocked the way for enterprises to go public in the future.

　　 "Many investors don't pay much attention to the equity structure when they invest. But from the perspective of listing, the CSRC requires you to be not only a model of making money in the industry, but also a model of standardization. We have contacted five or six similar enterprises, and the financial indicators have passed the standard, but the listing time has to be postponed because of the unreasonable equity structure. For example, a few days ago, we just saw one The project has also been invested by PE. Looking at the main body in front, all the money contributed by shareholders is prepaid. The statements of the whole 2009 are to be deposited and income tax is to be collected, which means that the main body of the company in 2009 cannot be used. So now we need to set up a new company and start again. If the horizontal competition and related party transactions of new and old companies are cut off, this year is not the first year, but the three complete accounting years from 2011 to 2013. It is a pity that good projects that could have been reported immediately will have to be repeated for three years. " Said the above investment bankers.

Another investment banker added: "As the CSRC, we should be responsible for small and medium-sized investors, but they are not industry experts, and they do not have a completely accurate judgment on the industry. Sometimes the standard of judgment is whether the enterprise is compliant. So we will see that some enterprises with good industry prospects and profitability have been placed in the CSRC for a long time because of poor plans or other problems after they reported to the CSRC To be persuaded to quit. For example, it is normal to wait 12 months if the history is unqualified. Recently, many details of enterprises, including R&D capital expenditure, and the disassociation of related transactions, are the focus of the CSRC's review. "

　　 "Moreover, investment institutions should note that as sponsors, we view enterprises from different perspectives. First, we pursue different goals. As intermediaries, we are responsible rather than investing money, so we don't care much about the return of enterprises, but more about their safety. In addition, enterprises need to give buyers investors a stable cash flow and profit, which is similar to that of investment institutions The goals pursued are not very consistent. The second is the judgment of the industry. Investment institutions believe that industries such as solar energy, which have entered a mature stage, are unlikely to develop. But it is a good opportunity for investment banks. Only when the industry is stable and the uncertainty is eliminated can the sponsor recommend it for listing. Third, focus on enterprises. Investment companies may value the growth of enterprises, but as a sponsor, we pay more attention to who has the market advantage in the industry. In other words, we are looking for the leaders of sub industries, because the leaders mean that enterprises have mastered the advantages and industry development rules, and they are our high-quality customers. Growth is only the second factor in our view. " Another sponsor added.

PE pattern is in disorder

Under the upsurge of equity investment, state-owned assets, local governments, securities companies, private enterprises, foreign capital and other capitals have shown their abilities. Many investment institutions have reached investment agreements with enterprises half a year or even a month before they submit the application materials.

　　 "Everyone is working on PE now, but professional PE can't get the order. People say you can talk about it. After you talk about the final contract terms, you agree to 15 times the price, and he agrees to 18 times. If you say that there is a limit on gambling, he will cancel all. So it is often non professional PE who can grab the project at the door, and there may be some transactions behind it, so PE will change It has become a robber behavior without any technical content and professionalism, similar to robbing money. "

　　 "Judging from the situation of listed enterprises, institutional investors have entered the enterprise very early, which is still a small number. The vast majority of investors have jumped in before the IPO. This is not very optimistic from the perspective of the development of the entire PE industry and enterprises. The value of PE is more reflected in the value-added services it brings to enterprises other than money. Moreover, if everyone is in such a biased position If you are aggressive or eager for quick success, it may be more difficult for smaller and earlier enterprises to raise funds. After all, they need help most. "

And an investment banker told our reporter frankly that from the perspective of the CSRC, he also hoped to have two or three years of investment time to incubate enterprises, so he was very strict with investors who walked in. The newly added shareholders in the year before the declaration need to disclose the resume of natural person shareholders in the last five years, and the information of major shareholders and actual controllers of legal person shareholders. For the new shareholders six months before the declaration, the issuer shall make a special explanation, including the reasons for capital increase or transfer, pricing basis and source of funds, the background of the new shareholders, whether there is entrustment, trust shareholding, benefit transmission, the relationship between the new shareholders and the issuer and its actual controller, the issuer's directors and supervisors, the intermediary and its signatories of this issue, The influence of the issuer's financial structure, corporate strategy and future development.

　　 "Relatively speaking, behind the GEM boom, there are two types of investment institutions that are more dominant: one is the local venture capital with a long history, because it has reserved many projects, and its performance broke out at once. The other is the direct investment of securities companies. Some securities companies see some good enterprises and let their direct investment departments participate in it, which moves quickly. From another perspective, the direct investment of securities companies It also becomes the price code for providing back-end value-added services. "

　　 "Few foreign investors have successfully listed on the GEM. Because many of them previously invested in overseas structures, it is difficult to reorganize and list on the GEM. In addition, foreign funds face the embarrassment of the VAM agreement. In the fund investment of red chip structures, VAM is a common practice, and it is also normal to propose some performance goals for enterprises. But now, the CSRC has opinions on these things It is said that to be listed, one must give up gambling. But the problem is that investors may pay a higher price when they invest. The VAM is part of the commercial conditions, and it is not easy to change it. "