Analysis Of The Motivations And Effects Of Equity Carve-out Of MicroPort Medical From H Stock On Sci-Tech Innovation Board

Equity carve-out is an effective form of asset restructuring that can provide companies with a new financing platform,broaden financing channels,make corporate valuation more reasonable and gain share price gains.In 2019,the CSRC established the Sci-Tech Innovation Board and allowed domestic carve-out,breaking the restrictions on carve-out listing in China’s domestic capital market.The Sci-Tech Innovation Board has also become an important place for domestic carve-out of H-share companies by its unique advantages.Since the opening of the Sci-Tech Innovation Board until July 31,2021,eight H-share companies have listed their carve-out subsidiaries on the Sci-Tech Innovation Board.As the first H-share company to carve-out its subsidiaries to the Sci-Tech Innovation Board,the case of Micro Port Scientific Corporation is typical and exemplary.This paper focuses on the motivation and effects of carve-out of Micro Port Scientific Corporation to the Sci-Tech Innovation Board,aim to provide some thoughts for H-share companies that intend to carve-out in China when they do so,and to provide relevant insights for strengthening the regulation of carve-out in the domestic capital market.Firstly,based on the existing studies of carve-out,this paper summarizes the main viewpoints on the motives and effects of carve-outs of listed companies;secondly,it introduces the theories related to carve-outs and the regulatory system and carve-outs of domestic capital market for H-shares;then,it introduces the basic information of the carve-out subjects in the case of Micro marketing Micro Port Scientific Corporation carve-out to the Sci-Tech Innovation Board and explains the process of this carve-out;we analyzed the motivation of the carve-out from the perspective of the development strategy of the parent company,financing needs of the subsidiary,market value management and management incentives,as well as industry development and national policies;then,we analyzed and studied the capital market reaction after the carve-out by means of event study and Tobin’s Q,and also analyzed and studied the business performance after the carve-out,including the factor analysis that based on financial indicators and the analysis of the development strategy,management incentives,and use of funds raised that based on non-financial indicators;finally,the effect analysis verifies the motives of the previous analysis and draws the following conclusions:(1)the carve-out is beneficial to the parent company to explore frontier tracks and achieve scale expansion;(2)the carve-out is beneficial to the subsidiary to obtain reasonable market valuation;(3)the carve-out is beneficial to broaden the financing channels of the subsidiary to meet R&D needs;(4)The carve-out is conducive to improving the operating performance of the parent and subsidiary;(5)the carve-out is conducive to capturing the policy dividends of capital market reform and industry development.The findings of the study,together with the recent status of H-share carve-outs to the domestic market,lead to corresponding insights.For the H-share companies to be carved out domestically,they should review the situation and determine the carve-out strategy according to requirements of the strategic development;they should carefully choose the carve-out assets and prefer high-quality assets;and they should choose a suitable location for the carve-out according to their own needs.For the regulators,they should pay attention to improving the relevant regulatory,supervise and examine the motives of corporate carve-outs,and strengthen supervision to avoid chaotic phenomena such as speculation on carve-out concepts and manipulation of the market with insider information,so as to ensure the normal operation of China’s capital market.