Capital Market Needs Sustainable Growth Concept

Text: CITIC Securities Limited by Share Ltd investment banking director Liang Shuang

capital market Participants can be simply understood as enterprises (financiers, demand funds), intermediaries (brokerage firms, etc.) that earn intermediary fees in capital market operations and investors (holding funds). Of course, government regulation can not be ignored. Especially in China, capital markets and financial institutions are strictly regulated. Therefore, in understanding the logic of capital market demand and supply and operation mode, we should also consider the impact of domestic regulatory policies.

All industries involve production, supply and circulation. The basic price of products is affected by the cost of raw materials and so on, and the fluctuation of market prices will reflect the balance process of demand and supply. The same principle applies to financial products in the capital market. But finance is dependent on industry. Capital market reflects not only the situation of fund allocation due to the development of industrial economy, but also reflects many sociological categories. Therefore, the factors are extremely complex and difficult to predict. Therefore, as a tool for industrial development, entrepreneurs should understand the basic logic of capital market, pay attention to the operation of the market, and hire reputable professional institutions to find the best implementation plan. Implementation 。

Generally speaking, entering the capital market can start with the shareholding system reform, then introduce strategic investors, select sponsor agencies, conduct listing guidance, declare the public offering materials to the SFC, issue the listing after the meeting, and continue to consider the subsequent financing arrangements and business development strategies as a listed company, such as the expansion through mergers and acquisitions.

After the public listing becomes a public company, the most important thing is enterprise It has a standard value recognized by the market. Through the circulation of the two tier stock market, small shareholders of the enterprise can cash in at any time (more than 5% of the holders will have some restrictions), which is one of the reasons for the low cost of public capital and good liquidity. However, the pressure of the controlling shareholders is to employ a competent management team to achieve better performance than the market expectations in the form of corporate governance, so as to achieve stable or rising stock prices. Stock price is the benchmark of corporate refinancing. If the share price falls sharply, it will hinder the financing channel of enterprises.

At present, China's capital market, legal environment and business integrity culture are still in the process of continuous improvement. Therefore, if the enterprise is in a stage of rapid development, it needs most external funds to reform the listing system, and the introduction of strategic investors is a good start.

For the purpose of listing, the shareholding system is transformed, though a company is hired. experience As a financial adviser, the securities company is expensive, but because of the foundation of restructuring, good start can lay the foundation for the efficiency of the listing process, so it is very worthwhile. A good restructuring plan should be considered in a comprehensive way. When designing the ownership structure, we should give full consideration to the matching between the management mode of the enterprise and the business development strategy of the enterprise. At the same time, we should design the proportion of the private placement from the support of the business development and the characteristics of the investors.

If a company develops a net profit of $7 million, it should employ an experienced and sponsor qualification broker to restructure and introduce private placement, and try to choose the same sponsor to conduct the listing guidance and sponsorship work, so that the consistency of the enterprise design standards is strong, and the efficiency and quality of the securities dealers can be improved. But in fact, when a company initially contacts a broker, it is difficult to understand the work ability and reputation level of the other team members through acquaintances. If problems are found, they should stop working immediately and cut off their links through legal means, so as to avoid wasting money and energy in the future.

The listing of enterprises should be recognized by the current market. In the 30 years of rapid development of the Chinese market, the accumulation of wealth and the establishment of enterprises must pay a considerable price. Therefore, if a reputable organization can combine entrepreneur's determination and clear vision plan, such a cost will be reduced by the financial cost of the enterprise and further by the market. open up If profits are made again, if listed only for listing, the development of the company has not really been straightened out during the period. I am afraid that after the listing, not only the enterprises have been badly hurt, but they are faced with strict supervision. The old mode can not be duplicated, and the profit pressure of the company will be very large. There are many "shell companies" in the two tier market.

The market value of a company is usually calculated by multiplying the stock price by the total number of shares. When valuing, the market often uses a relatively simple way of estimating, that is, the net profit of audited financial statements in the previous year is multiplied by a PE multiplier. PE is the ratio of stock price to net profit of a company, and every industry in mature market will have a relatively stable experience value. For example, the manufacturing industry, in the private placement market, takes account of the liquidity discount factor at 6-8 times; in the two tier market, it can be circulated at any time, so it is about 10 times.

For example, a manufacturing company has a net profit of 100 million yuan at the end of 2010 (usually excluding the non recurring gains and losses). When introducing the war, the general price will consider the company to be worth 6-8 billion yuan. If it is a public offering, the market investor may give a price of 1 billion yuan. The domestic market is full of funds, and many of them are very priced. But entrepreneurs should remember that there is no such thing as a free lunch. Those who earn money and earn returns must be higher than the rate of return. Due to the lack of supply in the domestic stock market, listing as a scarce resource has a high premium. This phenomenon is not sustainable with the perfection of the system. If private equity investment does not calculate the discount of liquidity, they will urge you to go public as soon as possible, and the pressure of entrepreneurs will be very great. If some intermediaries in private placement take the cost of consultancy to raise funds (usually in proportion to the amount of funds raised), they are much higher than those in the same industry or even listed. company The valuation ratio, then, even after the listing, the return of private investors will be very limited. When money is much lower than expected, contradictions begin to emerge. Therefore, entrepreneurs should remember that not every time they get a high price, they are lucky. Sooner or later, you will pay the price. They are shareholders like you! And from a legal perspective, the minority shareholders and the weak will be very much protected.

Although the capital market is full of reefs, good helmsman will take advantage of wind and waves to enjoy the vastness of the world. In general, this is a fairly fair market, which is proportional to pay and return, and requires patience, continuous growth and win-win concept.