Should Enterprises Be Listed?

Zhou Chunsheng, Professor of finance, Yangtze River Business School, Professor of financial accounting

Various

From the perspective of finance, Professor Zhou Chunsheng first put forward his own views.

He believes that with the development of China's stock market and futures market and the deepening of enterprises' participation in capital operation, more and more enterprises need a chief financial officer who can understand the company's capital structure, understand the impact of the financial system on the company's value, and be able to judge whether the company should enter the capital market and gain the value promotion.

He said frankly, "such a CFO is not good enough", and at present there are not many CFO with comprehensive quality in China.

However, this slightly pessimistic argument is not at all joking through his exposition.

He divided the company's value into two aspects: market and capital cost.

A company's product has certain market volume and rapid growth space, it has value, but the capital market can make a significant change in this value.

At present, the most common financing methods in the market are debt and equity financing. There are public offerings and private placement. In the view of Professor Zhou, the stage of private placement is also the pition of the final listing. When all private equity investors choose to invest, they will also have their potential to be listed as an important consideration.

So what about a smart CFO with debt and equity issues?

The arrangement of the capital structure of an enterprise is the distribution of the proportion of the company's various sources of funds.

The financing mode of an enterprise determines its capital structure, and decides that the senior capital cost will ultimately have a crucial impact on the value of the company.

Theoretically, in a highly efficient and fair market, the cost of debt capital should be less than the capital cost of equity through legitimate and reasonable borrowing.

Because the former is interest, and the latter is determined by investors' expectations of returns, which may fluctuate and there are still inputs from restructuring enterprises.

Therefore, when the price of capital market is underestimated, companies should choose more ways of debt financing.

Speaking of this, Professor Zhou suddenly put forward a unique point of view.

He believes that the bubble is not necessarily bad, if the enterprise is good at grasping opportunities, it can also convert "paper" wealth into real gold and silver.

Because in such a market, the stock of the company is overvalued and the equity can also be used as a medium of payment. "If we borrow 100 yuan from the bank, we need to pay 6 yuan interest a year and pay 4.5 yuan in taxes and fees.

But according to shareholders' expectations, the cost of capital can be significantly lower than the former if they can get a total of 100 yuan by providing them with a bonus of 1 yuan.

The assumption of this lifetime is that the capital cost of the expansion of the company after the listing is diluted.

In order to further corroborate his views, he also threw out "small Superman" Richard Lee's PCCW has raised hundreds of billions of money, once a body overtake as the richest man in Hongkong, Li Jiacheng, an example, "bubble can be an opportunity."

But this argument later laid the foreshadowing for Professor Xue Yunkui's equally tactful refutation.

In further explaining the concept of equity financing, Professor Zhou analyzed the difference between private placement and public offering according to the difference of liquidity.

In comparison, the liquidity of private equity is significantly less than public offering.

Increased liquidity can greatly increase asset prices, so investors will want to push the business to the road of listing.

However, as a business operator, the problem can not be so simple.

Investors expect several times the expected cost of the company, which is almost double the operating cost.

"Listing can certainly bring a lot of benefits," Professor Zhou said. It can lock in the huge wealth of the original shareholders, reduce the cost of the company's capital, increase the company's value, and attract the attention of the media and the public, and increase the chance of market expansion. "It's like buying a villa and giving ten Bentley."

However, he also cautioned that "listing will bring many challenges". The most obvious thing is that the capital structure reform of enterprises, the introduction of strategic investors, the need to accept supervision, the need to disclose the information that did not need to be disclosed and so on, so that we need to pay a lot of operating costs in the past or continue to make the enterprises become standardized.

Finally, Professor Zhou gave some macro criteria for selecting the listed companies: choosing a highly mobile market, so that the lower the cost of capital, the easier it is to realistically examine the valuation level of the market and the threshold of listing. Each market has its own characteristics and needs.

All kinds of problems, CFO, we need to think about it.

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Xue Yunkui: "pie" or "trap", this is a problem!

Then came professor Xue Yunkui.

Compared with Professor Zhou Chunsheng, who is optimistic about the capital market, a silver haired Xue Yunkui speech is equally passionate, but the essence is pessimistic.

The gesture of his flying is afraid that many entrepreneurs who have already made up their minds to rush into the capital market have fallen into a new entanglement.

Professor Xue is developing another field of vision -- from the perspective of accounting, to see the problem of capital market value creation.

Almost once he came to the stage, he brought back the good picture of people from the public market to the real origin: is there any shortage of money in my company? Is there enough market volume in my business? Do I want to have enough liquidity in the capital market?

"If your career doesn't need money, why don't you know how to get it? Why do you want to go public?" he retorted. He cited the example of the famous flush software development company. When the company raised eight hundred million or nine hundred million yuan from IPO, it made a big impression on the money. "Finally, it took office building. Do you call it a software company or a real estate business?" (the use of funds is not in line with the demand raised in the public offering. According to the regulations, it can be regarded as the act of "pferring the main business").

Then an interesting scene took place.

Professor Zhou Chunsheng's "bold assumption of the cost of equity capital than the cost of debt" is less than ten minutes ago.

However, he also admitted that because the Bank of China generally needs collateral for the way of borrowing, and it is very difficult for an asset company to borrow money, it is a good path to choose to go public.

He also humorously said: "the children of many founders of companies are not interested in inheritance. The company can consider listing, so that you can lock in wealth if you do not own the business."

Not only that, "listing overseas" can turn the renminbi into US dollars and sterling, which legitimately and reasonably disperse the policy risks that the company may encounter in China.

He pointed out that from the accounting point of view, the biggest role of listing is to reduce financial risks.

Assuming that the original debt ratio of the company is 60%, IPO can raise it to 30% after raising funds, which is the average in China's small and medium board market.

No matter which board is listed, the increase of equity capital will reduce the risk.

However, according to the relevant data, China produced 175 new IPO companies in 2008 and 2009.

Before listing, they averaged an average of two yuan per share, while the listing price was 18 yuan. On the first day of listing, they often went directly to 32 yuan, with an average increase of 15 times.

The biggest disadvantage is that many companies suddenly take a lot of money to come back and don't know how to spend, so they can't benefit, and shareholders' returns are showing a sharp decline.

Professor Xue also threw out a set of average statistics: before the company IPO, shareholders had an average return of nearly 30%, while the main board was only about 10% after listing.

"Originally you are a little horse drawn car, but after IPO, the extra money did not spend on the knife edge, you have not turned into a big horse, but the car has changed into a big car, and the shareholders' repayment has naturally shrunk."

He cautioned that for this reason, many of the companies that had done well could be delisted or even closed down.

China's capital market, especially the gem, is at an unprecedented high fever.

"Many companies have reached 100 times earnings after listing, which is like believing that a bride can maintain a beautiful state for 100 years.

How can this be? "Professor Xue believes that after the wave of the sand, the number of surviving companies will not exceed 10%, and only those who recognize their investors are the only winners.

As for what many people believe is that "IPO can bring the effect of corporate popularity", Prof. Xue once again produced data to refute it.

"It's just a very different case!" he told the audience over the sales profits of several years before and after the listing of the main board, small and medium board and GEM companies on the PPT. In fact, the sales profits of these enterprises were almost fixed, and there was a reasonable drop in the financial crisis in 2008.

"The listing will make the management pressure of the company suddenly increase, and there are a lot of explicit costs. If you want to invite a supervisor who has not been in the company in the past, the manpower investment will be improved."

He said frankly whether or not the listing should be considered as a major event for the company. Whether it is "pie" or "trap" needs a very rational analysis and judgement.

After the speech of the two professors, people also heard the wonderful speech from Chen Hongqiao, deputy general manager of Shenzhen stock exchange, Tian Maoyong, chief editor of chief financial officer, Shen Yanlei, and Shen Yanlei, the representative sponsor of Guoxin Securities. They provided professional experience from the choice of listing sites, financial statements design, and the process and difficulties of enterprise listing.

Mr. Lin, a finance director from Shenzhen hi tech startups, said he was "very productive today".