Motivation,Path And Economic Effect Of Full Subscription Of Private Placement Shares By Major Family Shareholders

In the initial stage,family enterprises basically use the company’s internal funds to meet the needs of the company’s operation and development.However,with the expansion of the company’s scale and the increase in the demand for funds,the internal funds become a drop in the water,and the enterprise needs to develop new financing methods to support the development of the enterprise.However,due to the attributes of both "family" and "enterprise",the credit degree of family enterprises is often not as high as that of ordinary enterprises,so there are problems of financing difficulty and high financing cost.In February 2020,the national policy loosened the restrictions on the repeated financing method of private placement.Many family enterprises saw the new direction of financing and began to choose private placement.In the hot private placement market,there is a phenomenon that is becoming more and more frequent,that is,major shareholders all subscribe to private placement shares.The so-called full subscription of private placement shares by major shareholders means that the major shareholders subscribe all the shares issued by the enterprise as the issue object.In this kind of enterprise,the majority of the family business.Hesheng Silicon Company is an enterprise founded by the Luo family,mainly engaged in the production,research and development and sales of industrial silicon,organosilicon and polysilicon related products.So far,it has become a leading enterprise of industrial silicon and organosilicon in China.In the past two years,the company has completed two private placement by major shareholders of the family in succession,and the total amount of financing reached 9.5 billion yuan.Therefore,this paper considers that the selection of Hesheng Silicon Company as a case enterprise has a certain typicality.The main research content of this paper is carried out under the logical framework of "antecedent-path-result",and starts from the financing demand under the expansion strategy.Among them,the antecedents refer to the two questions of why Hesheng Silicon should carry out the private placement and why it should choose the family major shareholders to undertake the private placement;The path is to sort out the capital operation logic of the family shareholders’ subscription funds,that is,how the family shareholders raise large amount of capital increase to participate in the private placement;The result refers to the economic effect of the issuance on the enterprise,which is analyzed from four aspects:short-term market response,solvency,profitability and economic value added.At present,the academic community lacks the research on the specific financing behavior of family enterprises and private placement,let alone the research on the private placement of large family shareholders.Therefore,this paper attempts to use the case of Hesheng Silicon and relevant theories to explain and analyze this special financing behavior,with a view to filling the gap in previous research;At the same time,it is helpful for investors to better understand the decisionmaking behavior of the enterprise and make correct investment value judgments,and also provide reference for the supervision of relevant departments and be alert to the problems and risks that may exist in each link.Therefore,this study has certain theoretical and practical value.The theoretical basis of this study is mainly three,including the unique social emotional wealth theory in the field of family business research,the classic signal transmission theory and the private interest theory of control applicable to the analysis of the behavior of major shareholders.At the same time,this paper also draws on the existing literature on family business financing and the private placement of large shareholders.The data in this paper mainly comes from the company’s official website,company announcement,and the financial terminal of Oriental Fortune Choice.Through the analysis of the causes and consequences of the private placement event undertaken by the major family shareholders of Hesheng Silicon,the conclusions of this paper are as follows:(1)The motives of the private placement event undertaken by the major family shareholders are mainly in three aspects.First,the company has too much debt financing in the past,resulting in high financial risk.The use of equity financing can optimize the company’s capital structure and reduce financial risk;Secondly,in the case of the continuous downturn of the stock market,family enterprises can demonstrate the family’s confidence in the future development of the company and boost the investor’s sentiment by taking advantage of the family’s major shareholders to undertake the targeted additional issuance;Finally,the children of the family founder will be responsible for the private placement,which can strengthen the control of the second generation of the family and boost the intergenerational inheritance.(2)When the family’s major shareholders monopolize the private placement,the large amount of subscription funds mainly come from the funds obtained from equity pledge and the company’s own funds for dividends,of which the funds obtained from equity pledge are the most important.(3)In the short term,it is good news for the market that the large shareholders of the family undertake the private placement,which can bring the excess rate of return to the enterprise.In addition,this behavior can also improve the long-term and short-term solvency,profitability and the ability to create value of the enterprise.