The Research On The Stock IPO Pricing Strategies

GEM (Growth Enterprises Market) board is secondary security market besides the main board. Its main purpose is to provide financing platform for small and medium-sized innovative enterprises, solve financing difficulties and the narrow financing channel for high-tech enterprises., establish normal exit mechanism for innovative enterprise . This is an effective measure to promote technology and informatization for many countries and also a product of the countries who encourage innovation in the 1970s. Since the US NASDAQ was established, the developed countries such as Japan and European countries construct their own GEM one after another. The GEM market in mainland was set up in September 2009 after ten years'preparation. It follows the regulations and valuation of the main board. However after a period of time ,these measures are tested not suitable for GEM. Due to the difference between GEM and main board such as the high risk and growth in GEM , the rules suitable for mainland doesn't mean that it also fits for GEM. So how to determine a proper price to reach win-win situation in GEM has become worthy to research .First, this paper makes a literature review on the stock IPO pricing. Respectively from enterprise value evaluation model to the phenomena before or after IPO. There are three kinds of enterprise value appraisal methods in the world: Traditional discounted cash flow model, Relative valuations, Options valuation method. And generally introducing the content of the method. After that introducing the phenomena before or after IPO: IPO underpricing, Long-run Underperformance of IPOs, IPO top-selling phenomenon. And introducing the research results from the attitude of domestic and foreign . Domestic research conclusion shows China's stock market also owns the three common phenomena.Second base on the theory, a detail research is done on the three kinds of enterprise value appraisal models : DCF (Discount Cash Flow)model, EVA model, PE model. Then take an analysis on them in the aspects of advantage and weakness, the applicability . Through the analysis on the traditional models and in combination with the characteristics of GEM market itself, There are three kinds of models that suits different market situation. Chinese GEM has it own characteristic .Then the GEM of Chinese characteristics are analyzed. China has the characters in small scale, the investment risk, individual concentrated ownership, high-tech enterprises, most companies at the beginning stage of growth, science and technology progress, the full circulation, etc. It is found that the PE model is more suitable than others, but parameters that affect the PE should be modified to accord with the request in GEM. Then proposing modified PE model that is suitable for mainland growth enterprise market. Then dividing the parameter into Risk parameter, Two-linkage board parameter, Industry foreground parameter, Science and technology parameter, Operation parameter. Then adjusting it with the system risk parameter. After that applying the model on some GEM company, analyzing the stock value to get a suitable interval. The data comes from the open stock market .Third taking an analysis on the pricing ways in mainland market, doing a research on the developing track of the IPO pricing way in mainland market. Listing the four stages of pricing way and the changing tendency in the dominating power between market and the authority , the impact degree to the stock price. The stage from Administrative absolute pricing to the Inquiry stage . And for the international gem sale and pricing mechanism are analyzed. It includes Fixed price mode, Book building mode, Bidding mode .Then analyzing the pricing function of price and sale mode . On the basis above Chinese gem pricing problems existed are studied. It is found that China's gem take a high valuations, overdrawing future high growth expected; PE is not effectively controlled ; Gem under uncertainty of high converting, etc. Through the research, we can conclude that though the security market is taking an marketization way, the degree of marketization is still not so advanced, we need further promoting the process of marketization. The price of the stock should gradually move into the marketization. The government should exit IPO pricing process. Let market make the decision. At the same time authority need to maintain the stability of the policy, get rid of the nickname——policy market, look for more open pricing mode.Then proposing the rationalization proposals to promote the development of GEM: Accelerating securities marketization process, GEM IPO decided completely by the market, Strengthening the review mechanism of innovative enterprise listing, Weakening the request of company scale, Emphasizing service and system innovation, strengthening the publishing power to the illegal activities. From the four aspects above to and improve the GEM board.At last the full text summarized and the outlook for the future are taken. As a result of the fact that the inadequacy of the data, in the later study, it needs a lot of data to test PE modified model.