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Broker "backdoor listing" Motivation

Author: YeYu From: www.yourpaper.net Posted: 2009-08-04 12:22:18 Read:
Abstract: Following the September 2006, the success of GF Securities backdoor Yanbian Road since listing, the stock market one after another to the outbreak of similar messages, has more than a dozen brokerages intention to meddle in the backdoor listing. The domestic brokerages eager to have strong will rely on the capital markets to expand net capital, but there is no one able to meet the conditions of profitability for three consecutive years, therefore, want to do the first financing in the near future is impossible for most brokerages, become a backdoor listing viable option. This will combine case studies of brokerage "backdoor listing" motivation.
Keywords: backdoor listing; a backdoor listing motive; backdoor listing risk

The backdoor listing Motivation

High threshold of 1.1 IPO brokerage firms had to "backdoor" Bypass listed.
By the end of 2005, China's securities industry has been four consecutive years of industry-wide losses in 2007, most of the brokerage level of sustained profitability difficult to achieve the IPO for three years earnings ", and even meet this requirement, but also experienced a multi-channel program wait until the SFC for approval. Thus, even if all goes well, the most qualified brokerage wants to achieve market through the IPO, at least until 2009, of which there is a lot of uncertainty. In this context, the time-consuming short backdoor listing will undoubtedly become the second best option for the majority of brokers.
Direct financing of the development of the capital scale of the brokerage put a higher demand. Backdoor is often quickest listed ways for the broker. Backdoor IPO, the proposed listing broker facing two choices. Choose the former, because the IPO there difficulty. First, domestic brokerage, a far cry from most brokerage firms do not have the IPO conditions with respect to the strength of foreign brokerage. After all, the threshold of IPO, for example, the last three earnings over the past three years, the brokerage poor operating environment, leading to the situation of the industry-wide losses, only this one on the hinder most brokerage IPOs; Second, due to the share reform led IPO suspended for one year, just restored, the queuing more IPO takes a long time; addition, the lack of resources to pay share reform stage, so to absorb low cost shell resources listed brokerages provide a faster way.
Dynamic regulation of the 1.2 perfect capital markets and "net capital as the core".
The improvement in the capital market system of various infrastructure facilities and the completion of the split share structure reform, is bound to usher in the securitization era of China's economic, direct financing will also follow the rapid development, similar to the China Industrial and Commercial Bank of carrier-class large enterprise groups Fun to the A-share market and the corporate bond market. The listing of large enterprise groups, business opportunities and provide brokerage, capital strength of the brokerage proposed higher requirements, which requires brokerage firms to quickly change the current capital of the small scale of the status quo.
The "net capital as the core dynamic regulatory highlights the a brokerage capital scale of importance. July 23, 2006, the SFC announced the Securities Company Risk Control Indicator Measures "and" About the notice of the net capital calculation standards for securities companies in the securities industry, the move means dynamic regulatory net capital as the core away. After the amended twice "about securities companies engaged in innovation activities accreditation Interim Measures" also makes it clear that the scale of net capital brokerage Innovation category eligible for a wound "Hom. Can be seen from the intent of the above policy, the net capital brokerage various business development and scale expansion has become inevitable, the key factors determining the brokerage's position in the future market.
1.3 respond to competition from foreign counterparts need to brokerages and growth capital strength.
After December 11, 2006, China's financial industry will fully implement the opening-up commitment in the WTO accession agreement, domestic brokerages will face the brutal competition of the international financial institutions, in the capital, management, service, talent and foreign financial institutions a huge gap between domestic brokerages will face unprecedented competitive pressures, forcing the brokers have to first start from growth of capital strength, to improve the competitiveness of the various aspects of.
Mature markets abroad experience shows that public financing is the scale of operation and effective way and the only way bigger and stronger brokerage, domestic brokerage growth of capital strength in a short period of time in order to lay the foundation so as to enhance their competitiveness, necessary to seize the time to achieve the listing, and not just be satisfied with the level of capital increase. In addition, the listing or the best way to achieve equity incentive, can solve the problem of long-term incentive long troubled brokerage.
1.4 brokerages listed timing mature.
Since 2006, with the problems of the domestic capital market system, multi-level capital market system is being gradually establish steady progress in the innovation of financial products, margin trading, stock index futures and other new business, once implemented, will provide a new quality brokerage profit growth point; improve the business environment in the securities industry as well as the full recovery of the securities industry, will attract more and more social capital invested in the securities industry, these provide a good external environment for the brokerage listed. From a policy perspective, regulators in recent years has been on many occasions stressed the need to further broaden the brokerage financing channels, including support brokerage IPO financing, SFC agencies responsible have also made it clear that: "the Commission continues to encourage a group of The outstanding securities firms proceed with the IPO, the backdoor listing.
Since April 2006, the A-share market appears obvious signs of transgenic cattle by Bear, from the policy side, the fundamentals, capital, technical comprehensive analysis, this trend will also be expected to continue for years. Market conditions improved there will be conducive to the overall level of performance of the brokerage continues to maintain a good level, if the brokerage firms listed in 2007 and 2008, will get the higher pricing of the issue, so as to raise more funds.
According to incomplete statistics, by the end of 2006, 13 brokerage Orient Securities, China Merchants Securities, Western Securities is three consecutive years of profitability, Everbright Securities 7 family brokerage two consecutive years of profitability, most brokerage firms are expected to continue to 2007 earnings and state , so that, in accordance with the last three years of earnings requirements IPO will appear in 2008, especially in 2009, the situation of competing listing broker. Distribution system audit system will be a long time there, listed peak period to catch up with the future of the brokerage, the brokerage of listed audit will be slower, which is bound to affect the development of the brokerage.
1.5 brokerages want bigger investment banks.
The bigger and stronger by the the listed route through the capital market brokers are dream for many years, but has been a lack of opportunity to achieve the first purpose of its backdoor listing is financing. With respect to foreign securities firms tens of billions, hundreds of billions out of reach of the net asset size, domestic brokerages can not match. Obviously difficult to adapt to the competitive landscape of the future on their own accumulated operating. Now brokerages generally smaller scale, the backdoor listing important means of financing the brokerage business to scale. The confusion many the brokerage internal governance structure, the listing can increase brokerage transparency, the reform would be better. And the listing of the brokerage itself is an invisible ads. This value is conducive to boost market confidence and to conduct business, obtain bank trust.
In addition to one of the reasons for the purpose of financing, management and employee equity incentive brokerage listing backdoor listing is the best way to achieve equity incentive. This incentive is more meaningful of innovation and norms securities firms, brokerages who are just alive, the main purpose is the use of public financing to cover the loss was on Industrial Co., engaged in the investment in the legacy.
2 the backdoor listing broker's risk lies

The backdoor is the most efficient way to achieve the listing broker, expansion capital, stronger and bigger, but this is where the existence of the risk can not be avoided.
2.1 there is a risk choice of shell resources.
First, the face is the choice of Shell Resources backdoor listing broker, however shell resources seem to have a lot to choose from, but the space is not a real choice. The one hand, the brokerage would not choose competitive with their own companies, the opposite will choose some of the poor performance of the company as a shell resources to some extent, so that you can reduce the backdoor costs. But on the other hand, in accordance with the requirements of the SFC, securities companies can not engage in industrial investment, which means that by the shell of this broker only "net shell, brokerage into the shell company, shell company non-financial The assets must first displace, in order to facilitate the stripping Industrial assets such as financial assets, securities firms also need a stealth liabilities less, relatively clean shell. However, this shell resources, after all, not cheap, and may even threaten to broker the original capital.
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