| In order to expand the financing channels to obtain the capital necessary for the further development of the company,more and more non-listed companies intend to realize the transformation of corporate identity through backdoor listing to enter into the security markets for financing to directly obtain a stable capital flow.Compared with initial public offerings,backdoor listing can speed up the process of corporate listing and the cost of backdoor listing is lower than that of public offerings.However,due to the specialty of the backdoor listing trading methods,a series problems have arisen in practical applications: due to information asymmetry,moral hazard may be caused in one hand,the controlling shareholder of the target company exploit the relationship to divert and invade the shell company's resources after controlling the shell company.On the other hand,the underlying assets may be overvalued and the operating performance of the underlying assets will be difficult to achieve in the future.These problems have seriously damaged the interests of small and medium shareholders in the shell company.For the purpose to protect the interests of small and medium shareholders of listed companies,performance commitments have gradually been adopted in mergers and acquisitions transactions.On May 18 th 2008,the China Securities Regulatory Commission promulgated the ?Measures for the Administration of Major Asset Restructuring of Listed Companies.? The Article 33 of the Regulations stipulates: ?The assets appraisal agency adopts the present value of earnings method and hypothetical development method based on expected future earnings used for valuation of the assets to be purchased and used as a reference for pricing,the listed company shall disclose the differences of actual profit of the relevant assets and the forecast profit number in the assessment report separately in the annual report within three years after the implementation of the major assets reorganization.The accounting firm should issue a special review of this opinion.The counterparty in transaction should sign a clear and feasible compensation agreement with the listed company in regard to the relevant assets less than the number of profit forecast."Performance Commitment" refers to a regulatory mechanism for both reorganizing parties to face uncertain future investment risks,which has been widely used in corporate asset restructuring.As a valuation adjustment agreement introduced by the investor,?Performance Commitment? can effectively encourage and constrain the investees and avoid information asymmetry risk as well as help the invested company to obtain a rapid investment.Meanwhile,?Performance Commitment? can motivate the management of the invested company to work efficiently and promote the development of the enterprise,which will allow both investment and financing companies to profit from the capital appreciation of the invested company and achieve a win-win situation for equity investment.This article adopts a research method combining normative research and case analysis.Taking Huaxia Vision and Hanhua Yimei backdoor Far East Industries as examples,it discusses the performance application issues of the main board company under the background of backdoor listing.In the normative research section,this article reviews and summarizes relevant domestic and foreign literature,introduces the concept and connotation of backdoor listing and performance commitments,and briefly analyzes the selection motives and application effects of ?performance promises? in the context of backdoor listing.In the case analysis section,on the basis of examining the strategic drivers and influencing factors of the case,this paper combines charting and financial data and focuses on the case of performance commitment under the background of backdoor listing: in this backdoor listing,the target assets – Hanhua Yimei,the controlling shareholder of Huaxia Vision and the small and medium shareholders of Far East Industries have signed a three-year agreement in order to reduce information asymmetry and promote the success of the transaction as well as make incentives for the company's management to properly manage and promote the rapid development of the company.The profit forecast compensation agreement,with a commitment period of 2014 to 2016 which was benefit from good national policies,good industry development trends,and its own competitive advantages.Vision China has achieved its performance promise in three consecutive years and has built the company to a diversified,outstanding performance and promising cultural giants business.Finally,this paper combines the above analysis to draw conclusions,and puts forward some constructive suggestions for the application of ?performance promise? by the main board company under the background of backdoor listing.The research conclusions of this paper are as follows: On the one hand,performance commitments can promote the smooth progress of backdoor reorganization transactions and make a successful listing of the underlying assets;on the other hand,after the successful listing of the underlying assets,performance commitments can also help listed companies attract outside investment and complete the company expands as well as maximizes the value of the company.Although the performance commitments help the two sides of the backdoor listing to achieve a win-win situation,there are still some issues that need to be paid attention in practical applications:(1)Shell companies should carefully select the underlying assets and fully investigated target underlying assets before repurposing the loans;(2)After selecting the target assets,the shell company should also carefully assess the market risk to prevent the market environment from deteriorating to result in the performance commitments cannot be realized;(3)At the stage of reorganization negotiations,both parties of the transaction should be rationally established.It is not conducive to give full play to the performance promise with too low and too high targeted performance targets. |
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