In the arena of the capital market, financing means are the "weapons" for the survival and development of enterprises, and private placement is one of the strategic weapons. Some people use this to expand at a low level and achieve capital take-off; some people use improper operations to cause stock price collapse, and investors complain. Is private placement a "capital alchemy" or a "market cash machine"? What scenarios are premium issuance and discount issuance suitable for?
American Goheal M&A Group
In global capital operations, Goheal has witnessed countless companies achieve leapfrog growth through private placement, and has also seen many companies fall into financial quagmire due to mistakes in issuance. So, how to find the best balance between premium and discount? Today, let us clear the fog of private placement and explore the mystery.
The "mystery" of private placement: a precise game in the capital market
Private placement, in simple terms, is a listed company issuing new shares to specific investors in a targeted manner to raise funds for business expansion, acquisitions, debt repayment and other purposes. This operation seems to be just "printing money" to raise funds, but in fact it hides a series of complex market games.
First of all, the formulation of the fixed increase plan often needs to consider the issue price. There are usually two pricing models:
1. Premium issuance: the price of new shares is higher than the market price, which means that investors need to pay a higher cost to buy stocks;
2. Discount issuance: the price of new shares is lower than the market price to attract investors to subscribe, but it may bring about the problem of dilution of shareholders' equity.
In the global capital market, Goheal found that premium or discount issuance has its own advantages and disadvantages in different market environments. The key to choosing lies in the company's capital operation strategy.
Premium issuance: a touchstone of market confidence
Premium issuance is often a recognition of the market's future development of the company. For example, a technology company with outstanding growth potential has a bright future, and investors are willing to pay a higher premium to participate in the fixed increase. A typical case is that an international new energy giant completed the fixed increase at a premium of 120% of the market price when expanding its energy storage business, attracting global capital to compete for subscription.
Advantages of premium issuance:
1. Boost market confidence: the stock price will not be diluted, but may be driven up by capital optimism;
2. Optimize shareholder structure: attract long-term capital to enter and reduce the impact of short-term funds on stock prices;
3. Low financing cost: enterprises do not need to make excessive concessions and can obtain financing at a better price.
However, premium issuance is not a panacea. Once market confidence is insufficient or the company's future growth is not as expected, investors may lose interest due to the inability to obtain premium returns, resulting in the failure of the issuance. Goheal suggested that premium issuance is suitable for companies with high brand value and strong business growth certainty, especially those with unique technological barriers or market advantages.
Discount issuance: "accelerator" or "shareholder killer" of financing?
Compared with premium issuance, discount issuance is more attractive. After all, "buy low and sell high" is the ultimate rule of investors. Listed companies are willing to attract investors at low prices, often hoping to quickly obtain financial support, such as replenishing cash flow and completing mergers and acquisitions. For example, a real estate company chose to issue additional shares at a discount of 85% during the industry downturn, raising 10 billion yuan in one fell swoop and achieving counter-trend expansion.
Advantages of discounted issuance:
1. High financing efficiency: low prices attract institutional investors and complete fund raising in a short period of time;
2. Stimulate short-term stock price increases: investors expect that the company's operating conditions will improve after the entry of new funds;
3. Assist strategic transformation: It helps companies to make capital layout within a specific industry cycle.
But discounted issuance also has side effects. First, the equity of old shareholders will be diluted. Second, excessive discounts may cause the market to worry about the company's prospects and even cause long-term slumps in stock prices. There was an Internet company that issued new shares at a 70% discount in order to quickly obtain financing. As a result, the market interpreted it as a shortage of funds for the company, which led to a further decline in stock prices, forming a vicious cycle.
Goheal Group
Goheal reminded investors that discounted issuance is more suitable for companies with short-term liquidity constraints or the need to quickly deploy strategic assets. However, if the company does not have a clear development plan, discounted issuance may cause the market to doubt the company's governance capabilities.
Premium or discount? The ultimate choice of capital operation
In the capital market, private placement is not a simple question of "expensive or cheap", but depends on the development stage of the enterprise, the market environment and the risk preference of investors.
1. The industry cycle determines the strategy: in a bull market, the market liquidity is sufficient, and investors are more inclined to accept premium issuance; in a bear market, investors lack confidence, and discount issuance may be a more realistic choice.
2. The value of the enterprise itself determines the premium space: if the enterprise has strong fundamentals, investors are willing to pay a higher premium; but if the enterprise itself is under financial pressure, discount issuance may become the only option.
3. The impact of regulatory policies: some markets have policy restrictions on premium or discount issuance. For example, the A-share market stipulates that the price of private placement cannot be lower than 80% of the market price, which also limits the operating space of the enterprise.
Goheal observed that the attitude of the global capital market towards private placement strategies has been changing in recent years. More and more companies prefer premium issuance to maintain stock price stability and attract high-quality investors, while discount issuance is more used for financing needs of special industries or cyclical companies.
Conclusion: What is your choice?
Directed additional issuance is an important means of corporate capital operation. It can be a catalyst for expansion or a "meat grinder" for stock prices. Premium issuance and discount issuance have their own advantages. The key lies in how to make accurate decisions based on the market environment and corporate strategy.
So, how do you think the fixed increase should be priced? Is the premium issuance really better than the discount issuance? Welcome to leave a message in the comment area to share your views!
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions. It has been deeply involved in the three core business areas of acquisition of listed company control, mergers and acquisitions of listed companies and capital operations of listed companies. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
