A Study On The Financial Effect Of Major Shareholders Of Qianjin Pharmaceutical Company Participating In Private Placement

With the smooth implementation of the non-tradable share reform since May 2006,targeted SPO(secondary public offering)has gradually replaced rights issue and IPO and become the main form of refinancing on the Chinese capital market thanks to its merits such as low offering costs,simple review procedures,low disclosure requirements,and no requirements for pre-SPO profitability.Majority shareholders’ injection of their assets into listed companies through targeted SPO is currently a common practiced and,as to an SPO with the participation of major shareholders,two different viewpoints are commonly held in China.Those approving of this practice think that majority shareholders’ injection of their good assets into a listed company is positive in that it helps improve the company’s profitability and corporate governance.Those against it believe that,through this kind of participation,majority shareholders will reinforce their control over the company because of the increase in their equity and thus may harm the interests of the minority shareholders through series of tricks for their own gains.Therefore,on the basis of the research results already available,this paper seeks to research the background of SPO,motivation,and the economic results of SPO and,by selecting the case study of Qianjin Pharmaceutical SPO targeting majority shareholders and analyzing the participation of the majority shareholders in this targeted SPO,explore whether the behavior of the majority shareholders is breach or support;finally,it draws a conclusion thereof and provides corresponding suggestions.This paper is an attempt to carry out the research through theoretical analysis and a case study.Theoretical analysis involves agency theory,information asymmetry,supervisory effect theory,etc.,laying groundwork for the case study that follows.The case study first makes an introduction to Qianjin Pharmaceutical and analyzes its business operations prior to this SPO,and then describes the plan and process of this SPO.In the end,after making an analysis of such aspects as basic conditions of this SPO and its market and financial effects,it reaches the following conclusion: First,as to pricing,Qianjin Pharmaceutical selected the BOD resolution announcement date with the lowest price out of the three optional pricing reference dates,but the selected price did not exceed the scope stipulated in the SPO rules,therefore there was no suspicion of “benefit transfer”;second,this paper believes that,while there was no suspicion of an injection of non-performing assets or a false increase in asset value,the use of the funds thus raised complied with relevant regulations;meanwhile,the behaviors of SAH and Changan Funds indicated their confidence in the future of Qianjin Pharmaceutical;as to the research on the economic effect of this SPO,this SPO by Qianjin Pharmaceutical had a positive marketing and publicity effect and the analysis of its financial data over the past five years has revealed its post-SPO improvement in terms of solvency,profitability,and growth potential,indicating that this targeted SPO by Qianjin Pharmaceutical has produced a positive effect on the shareholder wealth over the long term.In short,the participation of Qianjin Pharmaceutical majority shareholders in this targeted SPO was a kind of support for the company.