Research On Arbitrage Behavior Of Private Exchangeable Bonds And Oriented Issuance

On October 19,2008,China Securities Regulatory Commission(CSRC)issued the Trial Provisions on the issuance of exchangeable corporate bonds by shareholders of listed companies,which solved the problem of "big and small" in the way of financial innovation.Qualified shareholders of listed companies can use pledge of stock rights to raise money,alleviate the capital dilemma of "large and small" shareholders at that time,and reduce their motivation to reduce their shares.But it was not until 2013 that China issued the first private exchangeable bond and it has been tepid.In 2016,it ushered in a blowout.Compared with public exchangeable bonds,private exchangeable bonds are welcomed by the market with its lower threshold and higher efficiency,and its issuance scale accounts for a large proportion.However,private exchangeable bonds not only have the feature of low interest,but also have the function of reducing holdings in disguised form.The combination of private exchangeable bonds and other financing methods can achieve the behavior of arbitrage,such as private placement.However,at this stage,the research and application of private exchangeable bonds in China is very scarce,and there are many weak points in the regulatory policies and regulations of private exchangeable bonds,which is not conducive to the sustainable development of private exchangeable bond market and damage the interests of small and medium shareholders.After in-depth analysis of relevant literature,theoretical basis and development status,this paper selects 16 Dongfang EB issued by Dongfang Ocean Group and directional additional shares issued by Dongfang Ocean company as case study objects:first,Dongfang Ocean Company confirmed the price of private placement and successfully issued it when the price was low,then Dongfang Ocean Group issued private exchangeable bonds and determined that the share exchange price was higher than the private placement price.During the stock period,issuers of private exchangeable bonds exchange shares to reduce their holdings.Large shareholders arbitrage through the price difference between the exchange price and the price of private placement price.Bondholders gain large profits through the price difference between the sale price and the exchange price.This paper first analyzes themotivation of private exchangeable bonds and private placements,and Behavior of the combination of the two.It holds that the purpose of private exchangeable bonds is to reduce holding arbitrage rather than low-cost financing,and the purpose of discount private placements is to consolidate control power and provide price basis for subsequent reduction;Secondly,from the perspective of equity structure,internal control,regulatory policy and private placements,this paper analyzes how the case company realizes the arbitrage according to the behavior of private exchangeable bonds and directional additional issuance;then,it analyzes the impact of private exchangeable bonds and directional additional issuance on the large shareholders,small and medium shareholders,listed companies and bondholders and other stakeholders;finally,the paper give the suggestions from the Perspective of the governance structure of listed companies,the disclosure requirements of private exchangeable bonds and the existing rules design,regulatory policies and small and medium-sized shareholders.