Research On The Economic Consequences Of Equity Carve-outs Between Shengyi Technology And Shengyi Electronics

At the end of 2019,the SFC issued the Provisions on the Pilot Programs for the Domestic Listing of Subsidiaries of listed Companies.The promulgation of the Pilot Provisions not only promoted the culmination of domestic corporate carve-outs and provided effective rules protection for carve-outs,but also brought more investment opportunities for investors and helped to enhance the development of China’s capital market.Since the implementation of the policy,A-share listed companies have been actively preparing for carve-outs,e.g.Geer,Grand Nation Laser,etc.As of the end of June 2021,14 A-share listed companies,including Shengyi Technology Corporation,have carved out their subsidiaries to be listed on the Science and Technology Innovation Board.On February 25,2021,Shengyi Technology Corporation announced that it had carved out its subsidiary Shengyi Electronics Corporation into an independent company and successfully joined the Science and Technology Innovation Board of the Shanghai Stock Exchange,creating China’s first "A to A".[A to A refers to a form of carved-outs,meaning that the parent company is already listed on the main board and subsequently carves out its subsidiaries to the Science and Technology Innovation Board,which is a new model of stock market listing.] This paper selects this carve-outs case to analyze its economic consequences;this will complement the research related to the carve-outs on the Science and Technology Innovation Board so that it can be effectively analyzed in depth and the findings can be applied to other companies that wish to carve out its subsidiaries to the Science and Technology Innovation Board.This will prompt more A-share technology listed companies to respond to the national call under the guidance of national policies,and is also of great practical importance to promote the healthy development of the Chinese stock market.This paper focus on the details of the selection of Science and Technology Innovation Board as the listing platform of Shengyi Electronics Corporation,and on this basis,studies the short-term market reaction and long-term effects of the carve-out of the two companies.The long-term effects section focuses on the measures taken by the carve-out companies in terms of financing,operation,and governance and the economic consequences generated.The research methods used in this paper are mainly case study method,literature study method and event study method;through the study,this paper finds that,on the one hand,since the carve-out,the parent company,Shengyi Technology Corporation,has seen its share price increase,its market share further expand,its operating performance improve and its core competitive strength strengthened;On the other hand,after the spin-off,the information asymmetry of the subsidiary Shengyi Electronics Corporation is reduced,the financing channels are broadened,the R&D strength is enhanced,and the management efficiency is improved.However,the stock market performance of Shengyi Electronics Corporation is sluggish and the operating performance is poor.In view of this situation,this paper further analyzes that it is mainly due to its lack of ability to respond to market changes,so Shengyi Electronics Corporation needs to improve its operation and profitability by deepening its main business,adjusting its product structure and increasing its efforts to reduce costs and increase efficiency.