Research On The Motivation,Risk Prevention And Control Of The Issuance Of Directional Convertible Bonds

The industry in which Saiteng Shares is engaged belongs to the downstream industry of intelligent equipment manufacturing,namely the sub-industry of automation equipment manufacturing,which mainly involves the end users of consumer electronics,new energy vehicles and lithium battery business.Due to the risk of huge dependence on major customers and a relatively simple industrial chain,Saiteng started to implement the development strategy of "endogenous growth + extension development" in 2018,and had a lot of merger plans.The acquisition of Ling Ou Technology is in line with the strategic objectives of Saiteng.The choice of the payment method is very critical,which relates to the success of the merger and acquisition transaction and the level of the price.Saiteng shares from the proposed plan to the CSRC approval,less than four months.Although the policy background does provide support for Saito to choose directional convertible bonds as the payment tool,any payment method has many disadvantage.Companies must have the psychological preparation to recognize and prevent risks.As a new M&A payment instrument,directional convertible bond is still in the early stage of development.As the first enterprise to take the crab after the pilot announcement was released,Saiteng Shares can still successfully achieve the aim.It is meaningful to motivate its issuance of directional convertible bonds as well as risk identification and risk control measures.The research object of this paper is the event of Seton’s issuance of directional convertible bonds and the merger of Ling Ou Technology.Through the introduction,theoretical basis and literature review,research case overview,case analysis,summarize and inspiration of five parts to step by step.The first chapter introduces the research details and approach based on the background and meaning of this paper.The second chapter is the theoretical basis and domestic and foreign literature review summary.The third chapter is the introduction of the case.Firstly,it introduces the fundamental state of the two parties.Then it introduces the state of the case from national policies and corporate strategies and the process.Finally introduces the terms of bonds.The fourth chapter focuses on analyzing the reason for releasing it,risk identification and risk control.First of all,it explains the motivation.Secondly,it analyzes the risks that will bring to the enterprise.Finally,it studies and analyzes how to prevent and control the risks.Through analysis,it is found that there are mainly the following risks in issuing directional convertible bonds: liquidity risk caused by unsuitable issuance time,merger premium risk caused by too low conversion price,equity dilution risk caused by too short lock-up period,imbalance risk of rights clause caused by ignoring game,and equity dilution risk caused by stock price fluctuation.Finally,the risk control measures are analyzed: When issuing directional convertible bonds,enterprises should pay attention to the selection of appropriate pricing base date,set low coupon rate to reduce liquidity risk,make reasonable use of theoretical value to avoid paying excessive consideration,achieve the balance of interests of both parties by designing reasonable price amendment clauses,set up segment-type performance rewards to improve synergies and monitor stock price volatility level in real time to effectively promote the completion of M&A transactions.The fifth chapter is the summarize of this article.