The Study On The Three "Highs" Phenomenon In China’s IPO

Chinese Stock market is comprehensive.Some listed companies claim themselves “rapidly growing”,making their own IPO high pricing,high P/E rating and high funds raising,namely three “highs”.Attributed to the high pricings,many new shares break their issuing prices in the first day and continuously slide,causing huge losses to stock holders.This article is a case study paper selecting Semir as IPO case,which is the highest IPO pricing and most excessively funds raising listed company in the first half of 2011.Its issued price is 67 yuan and was expected to raise 2.056 billion RMB,while its final raise funds is 4.69 billion,exceeding 2.634 billion than planned.This paper,using P/E ratio method,analyzes the IPO pricing level of Semir,and selects Metersbonwe as its comparative,as well as compares the P/E ratio of Semir with the clothing industry’s average P/E ratio,then finds that the P/E ratio of Semir is much higher than that of Metersbonwe and the industry’s average and its IPO pricing is too high.By investigating and analyzing the use of its raised funds,this paper finds that a large number of funds is unused,the use of funds is inefficient.This paper also analyzes the financial status of Semir before and after listing,finds that Semir possibly faked its financial report before listing to make its development seemingly prosperous.However,its financial report arises a reversal trend after listing.This paper tries to explore the reasons of this situation and gives some suggestions to the IPO systems,the stock issuers and the regulatory authority.T The possible contribution of this paper is to provide some reference for the improvement of future IPO systems and for investors’ choices.