Research On The Motivations And Consequences Of Huajin Listed Company’s Private Placement

The private placement is favored by the market due to its low issuance requirements,lowissuance cost,quick issuance,and low information disclosure requirements.It has far exceeded the initial public offerings,allotment and public offerings in terms of financing frequency and total financing amount.Private placement has made a figure among many financing methods and have become the leading role in the capital market.Huajin shares was chosen as a case study because the results of the two private placements of Huajin shares were significantly different.The first private placement has achieved remarkable results.The company’s business had been successfully transformed and its performance has improved significantly.The second private placement has witnessed twists and turns in funds raising.The funds were not put into the project until last minute,and ended with the project halt.It did little to help the company’s performance.Combining the motives and consequences of the two targeted private placements can help us to evaluate the effectiveness of the private placement and provide some reference for other listed companies in the private placement.The second private placement dispersed the company’s resources in the its primary petrochemical business,delayed the normal development of the company,and also caused losses to the private placement participants.The suspension of the original project and the idleness of funds are far from the participants’ expectation.The investment rate of return of the funds is far from meeting the requirement of participants and may hinder the company’s refinancing in the long run.Investors in the secondary market also suffer from the private placement.Though they cannot directly participate in private placements,the huge fluctuation in stock prices also brings huge uncertainties and certain losses to the investors in the secondary market,which will cause some damage to the company’s reputation and investor confidence.The present paper analyzes in depth the impact of the private placement through the four perspectives including the efficiency of use of funds after fixed increase,changes in business structure,changes in stock prices,and comparison of performance before and after fixed increase.Finally,corresponding suggestions are concluded as follow.The company’s strategy not only be in line with reality,but also focuses on its strengthened pricing mechanism,and reasonable benchmark date and benchmark price.The investors should supervise the dividend distribution after the private placement.The supervisory authority should strengthen supervision,reinforce theinformation disclosure,and improve the private placement review benchmark.The feasibility of targeted private placement projects must be strictly monitored.At the same time,the monitoring in use of raised funds should be emphasized.The protection mechanism for small and medium-sized investors should be established.Supervision and punishment on companies that deceive investors should be strengthened.