The Application Of Targeted Convertible Bond Pricing And Payment Methods

Mergers and acquisitions are becoming more and more active in my country’s capital market,and the scale and number of transactions are increasing,which is an important means of corporate expansion.In the process of M&A transactions,the choice of payment method has always been an important issue for both parties to the transaction.Currently,cash payment,share-based payment and hybrid payment based on the two are the only payment methods in domestic M&A.However,with the increase in the number of mergers and acquisitions and the complexity of mergers and acquisitions,cash and share-based payments have been unable to meet the increasing demand for transaction flexibility on both sides of mergers and acquisitions.In November 2018,the China Securities Regulatory Commission first proposed to use directional convertible bonds as a payment tool for mergers and acquisitions.As a new type of merger and acquisition payment tool that combines debt and equity,directional convertible bonds have high application potential.However,it is also necessary to recognize that directional convertible bonds have not been fully applied and regulated.This article uses the first case of A-share public announcement of the issuance of directional convertible bonds as the payment method and supporting financing case,summarizes the case experience and existing problems,provides reference for other companies to design payment plans and use this tool in the future,and also provides advice on the formulation and improvement of relevant laws and regulations.This thesis starts from the perspective of the pricing of directional convertible bonds.Through the pricing of directional convertible bonds,it studies the application of directional convertible bonds in M&A payment.Based on the stock volatility obtained by the GARCH model,after pricing it with the help of the BS model,this thesis finds that The pricing and payment consideration of directional convertible bonds are different,and this situation is not an isolated case considering the development status of directional convertible bonds.Therefore,based on the pricing results,this thesis discusses the current model of directional convertible bonds from the perspective of regulators on the one hand.In view of the current imperfection of the relevant rules and regulations of my country’s directional convertible bonds,it can also provide suggestions for the formulation and supervision of relevant laws and regulations of this instrument.On the other hand,this article starts from the enterprise itself,and introduces the concept of actual financing cost with the help of its pricing analysis.Provide experience and reference for the use of directional convertible bonds as payment tools in future corporate mergers and acquisitions,and summarize experience and existing problems.Based on the pricing results,after analyzing the case of China Dynamics M&A,this thesis finds that the value of directional convertible bonds is higher than the consideration paid,as a result,the actual cost of directional convertible bonds is relatively high.Therefore,in terms of application,the small proportion of directional convertible bonds in the case is due to the contradiction between financing functions and actual financing costs;in terms of supervision,the existing laws and regulations on the issuance of directional convertible bonds are still imperfect,and the current pricing of directional convertible bonds in M&A payment The mechanism is unreasonable,which creates room for benefit transmission.The problems in the application and supervision of convertible bonds stem from the pricing mechanism.How to ensure the reasonableness of the consideration paid by the directional convertible bonds,the rationality of the selection of the target of the directional convertible bonds,and the prevention of interest transfer and damage to the interests of shareholders will occur are major problem.Regulatory agencies should pay more attention to the design of the terms of directional convertible bonds and the corresponding pricing,and rationally improve the pricing mechanism of directional convertible bonds.