A Study On The Motivation And Results Of Equity Spin-offs In The Clean Energy Industry

With the issuance of documents by the China Securities Regulatory Commission in 2019 to open the channel for the spin-off listing of domestic enterprises,the spin-off listing activities of A-share listed companies have become increasingly active.21 A-share listed companies have successfully spun off their subsidiaries for A-share listing as of the end of 2022,more and more overseas spin-off listed companies have chosen to return to the territory,domestic spin-off listing has gradually become mainstream,and the spin-off listing system in the domestic market has become increasingly mature.The domestic spinoff system is becoming more mature.Spin-offs are widely used as a means to increase financing channels and improve management capabilities.When a group needs to adjust its business structure due to strategic expansion or development,and the financing needs of its subsidiaries can no longer be met,the company chooses to split itself in China.However,mindless spin-offs can cause new problems such as inefficient governance and biased company value valuation.Therefore,this paper focuses on the motivation and economic consequences of the spin-off of Mega Media,a subsidiary of Lianmei Holdings in the clean energy industry,for the future reference of the spin-off of companies in various industries.This paper first analyzes the macro environment including national policies and recent industry situation,and then analyzes the motivation and results of the spin-off of Mega Media,a subsidiary of Lianmei Holdings,from multiple perspectives to explore the change of company value and business performance impact brought by the domestic spin-off.In terms of motivation,firstly,Mega Media’s strategic development needs make the company require a large amount of project construction funds.Secondly,Mega Media is undervalued,and a public listing can receive stricter disclosure regulation from the market and regulators,which also allows the market to value it more reasonably,and at the same time attract more investors,broaden financing channels,get rid of the dependence on the parent company,and obtain the funds needed for fundraising projects.As the main business relevance of the parent and subsidiary is too low,the motivation of the parent company’s spin-off is to achieve an improved capital structure,optimize management responsibilities and highlight the main business.In terms of the effect of the spin-off,the market reaction to the listing of Mega Media was relatively negative.In the short term,Mega Media’s market value decreased instead of increased and the parent company did not obtain a positive excess return during the short period of listing,but the market value of the subsidiary showed an increasing trend over time.Combining the financial indicators of the parent and subsidiary companies,the paper finds that the spin-off does not solve the problem of decreasing operating capacity and profitability of the parent and subsidiary companies,and so far the spin-off does not have a sustainable positive impact,but the financing capacity of both the parent and subsidiary companies has improved.Finally,this paper proposes recommendations for listed companies to spin off their subsidiaries for A-share listing.Firstly,before deciding to spin-off,the parent and subsidiary should have a comprehensive and detailed understanding of their own operation,competitive advantages,business structure and development strategies,as well as the macro industry trends and national policies,in order to determine the necessity of spin-off.Secondly,choosing the right spin-off target will give both the parent and the subsidiary a chance to gain value after the spin-off.Finally,after the spin-off,the company needs to pay attention to the actual effect,continuously focus on the company’s value,business performance and changes in corporate governance capabilities,etc.,and make timely strategic adjustments to achieve the expected spin-off effect.