Research On The Impact Of Convertible Bond Conversion Failure And Resale

In recent years,the convertible bond has become a new investment hotspot as one of the most popular financing methods in the market.Since the amendment of the Implementation Rules of Non-public Issuance of Shares by Listed Companies by China Securities Regulatory Commission in 2017,the convertible bond market has grown rapidly,with the number and scale of issuance reaching record highs.Convertible bond is a combination of bonds and stock options.It is a supplement to the traditional financing and an important part of the capital market.Although most of the convertible bonds in the market can be converted successfully and have positive impacts on corporate performance,there are a few exceptions that have not been successfully converted with bond put option in advance.These convertible bonds not only fail to achieve the expected goals of the company,but also further deteriorate the company’s business.In view of this,in order to clarify the external circumstances that contribute to give full play to the financing advantages of the convertible bonds and explore feasible directions for the healthy and orderly development of the subsequent market of convertible bond,this paper attempted to analyze Huifeng Company’s failure of conversion in bonds and stocks and its bond put option,and investigated in depth the impact and reasons for the failure.The paper adopted methods of literature research,case study,financial analysis,and EVA analysis.A comprehensive analysis was conducted for the impact of the failed conversion in bonds and stocks and its bond put option as well as the resulting consequence,and the reasons for the failed conversion and bond put option were investigated from several perspectives,such as industry and corporate characteristics.Reasons for the Huifeng’s failure can be summarized into five aspects: the severe situation of the industry,the issuance of convertible bonds at a wrong time,the shortcomings of the issuing enterprise,the unreasonable planning of the fund raising,and the weak willingness of convertible bonds to convert to stocks.Based on the above analysis,the study put forward proposals to the financing of convertible bond for the enterprises: enterprises need to pay close attention to the external environment and reasonably evaluate their own conditions before issuing convertible bonds;choosing the right time for issuance and carefully selecting investment projects;paying attention to the reaction of the capital market during the issuance;and using the downward modification clause of the conversion price in a timely manner.This research not only provides reference for enterprises in choosing the convertible bond financing,which contribute to the healthy and orderly development of the capital market,but also further reveals the antecedent conditions of the advantages of convertible bond financing,which has a realistic reference value and theoretical contribution.