The Case Analysis Of Guanghui Energy Financing Decision

With the successive introduction of the Guidance Opinion of the State Council on Preferred Stock Pilot and the Provision for Preferred Stock Pilot,finally there are legal bases for Chinese listed companies issuing the preferred stocks.It arouses the boom of preferred stock in Chinese capital market since then.However,due to the short history and limited experience,the theoretical analyses on the preferred stock seem deficient.As the first listed company that had been approved and issued the preferred stock,GUANGHUI ENERGY Co.,Ltd(600256),is also the first that abandoned it and moved to directed additional.The bizarre twist has drawn huge attention by market and could have good value of theoretical research.The report is an in-depth study on GUANGHUI ENERGY,which is the first A-share listed Chinese company that emerged the issuance plan of preferred stock,obtained the approval from CSRC,then abolished it finally for directional add-issuance.Through digging into the whole process of transition,the report will tentatively offer an explanation for its behavior from strategic,financial and policy level.Aiming to offer helpful inspirations for the listed companies whether financing by preferred stock or add-issuance,the report will analyze what factors should be considered when the listed companies use preferred stock financing and the influence to common share price by the GUANGHUI ENERGY case.The conclusion of the report : Firstly,although it comes with lot of advantages,the preferred stock can hardly be issued for financing to the majority of listed companies due to the restriction of various conditions and circumstances in the context of China.Thus it is wise and correct for GUANGHUI ENERGY that changing the issuance plan of preferred stock to add-issuance.Secondly,the listed companies should take into account the cost of capital,profitability,financial cost and development capacity when choosing whether preferred stock or add-issuance for financing.Thirdly,the government should improvethe refinancing policy of listed companies,reduce the access threshold of preferred stock appropriately and encourage more listed companies to issue preferred stock financing.Meanwhile strictly restrict the private placement and other irrational SEO behaviors of listed.