Understanding Finance from scratch

Chapter 33 What to do when you are short of money, how to become a master of capital operation - learn some financing knowledge every day (4)
However, the current development of the pawn industry is still relatively slow, and it is the same in our country.This phenomenon is not surprising.Because, although pawn is a convenient and fast financing method, since it is not a mainstream financing channel in a country, people's use of pawn is not yet as familiar and frequent as bank loans.Statistics show that there are currently 1.5 pawnshops in the United States, and only one out of every 10 American adults goes to pawnshops to borrow money every year. demand problem.In Canada, there are 1200 pawnshops across the country, and only 10% of the adult population receives pawn financing services every year.In contrast, the number of pawnshops in mainland my country is far lower than that of western developed countries, and it has gradually decreased in recent years.Therefore, judging from the layout of pawn shops, it is impossible for pawns to become a financing method with high social utilization procedures.For example, there are currently only 4 pawn shops in Beijing, 12 in Shanghai, 23 in Tianjin, and 29 in Chongqing. The number of pawn shops in most other provinces and regions is generally 1100 to [-]. The market is blank, which makes it difficult for the pawn financing method to gain the understanding and recognition of the general public, let alone consciously use it.

In addition, according to the practice of pawning in various countries and regions in the world, among the social groups who understand pawning, the vast majority of people do not have many opportunities to use pawning for financing.Because the purpose of pawning is mainly for emergency, that is, to deal with some unexpected events encountered by individuals or families, such as seeking medical advice, theft and disaster, etc. due to financial constraints and urgent need for loan turnover, otherwise pawning will not be used.At the same time, there are still a small number of people who use pawn financing to satisfy their personal abnormal consumption or to commit crimes of selling stolen goods.Of course, in some countries and regions, the social and economic phenomenon of Chinese and foreign enterprises using pawn financing has increased, but a certain climate has not yet formed, so it is impossible for the pawn financing method to be popularized in a wider range due to the favor of some small and medium-sized enterprises .

From the point of view of the pawnbrokers who often use pawn financing, these people are generally restricted by two conditions and go to pawnshops to borrow money, that is, to meet their own financial needs through the pawn method of exchanging goods for money, otherwise they will not use pawnshops. pawn.One is the poor personal economic situation.For example, in the United States, there are currently the most pawn financiers with annual household income between US$5000 and US$5. These people either have heavy family burdens, or have low education levels and unstable employment conditions, and often cannot make ends meet. Therefore, they can only use pawn financing. To make up for the lack of effective sources of income and other effective financing channels.However, the phenomenon of "the middle class going to pawnshops" can also be found in the United States, and the middle class has begun to become a unique financing force that cannot be ignored in the American pawn market.Second, personal bank credit is not good.Here mainly refers to asset credit, which is closely related to personal economic status.For example, a considerable number of people in the United States either do not have bank accounts, or although they have bank accounts, their credit lines have been used up, so they cannot pass the credit review of banks and other financial institutions, making it difficult to obtain credit cards or consumer credit, which forces them to prefer Set your sights on pawns and use pawn financing.

Buying a shell and going public: the technique of reviving the dead for financing

Founder Technology is the only company that achieved a successful IPO through acquisition in the secondary market.Its shell company is Yanzhong Industrial (600601), a well-known "three-no concept" stock.Yanzhong Industrial is one of the "Shanghai Old Stereotypes", with a very special share capital structure, all of which are socially tradable shares.Yanzhong Industrial's previous main business was relatively vague, including drinking water, office supplies, etc., and it had no development prospects. It was a very good shell company.

From February to May 1998, Shen Baoan (2), the former largest shareholder of Yanzhong Industrial Co., Ltd. raised signs five times to reduce its holdings in Yanzhong Industrial Co., Ltd., while Peking University Founder and related companies acquired 5 million shares of Yanzhong Co., Ltd. through the secondary market. Stocks, accounting for 000002% of the total share capital.Later, Shenbaoan successively reduced its entire shareholding, and Founder of Peking University became the largest shareholder.

Founder of Peking University later injected high-quality assets such as computers and color monitors into Yanzhong Industrial, and changed its name to Founder Technology. Yanzhong Industrial has since become a purely listed company in the IT industry. The listing was a complete success.

From the perspective of the cost of buying a shell and going public, the original acquisition of 526 million Yanzhong shares cost hundreds of millions of yuan, but the actual expenditure was not high through successful market hype and subsequent shareholding reduction.

So, what exactly is going on the market by buying a shell?How does it work?What's the point of choosing "shell"?

First give a definition of shell-buying listing: shell-buying listing means that an unlisted company obtains a controlling stake in the company by purchasing a certain amount of stock in a company that has already been listed, and then raises funds from the public by issuing additional shares. Acquisition of its own business and assets, so as to achieve the purpose of indirect listing.

The over-the-counter acquisition or transfer of non-tradable shares by agreement is the main way of shell listing in my country.According to the statistics of shell-buying listings in the Shanghai market in the first half of 1999, among the off-market acquisition methods, the three most frequently occurring methods were state-owned stock transfer (40%), legal person stock transfer (40%), and acquisition of controlling shareholders (12%).Among them, companies controlled by the State-owned Assets Supervision and Administration Commission and government departments have the most actions to buy shells and go public.In addition, the phenomenon of securities companies and investment companies getting involved in buying shell listings is increasing day by day.

The main advantage of buying a shell listing in the A-share market is: after listing, it is possible to refinance (additional issuance or allotment), that is, to raise cash from the stock market by expanding the number of shares.Due to the strong liquidity of the stocks of listed companies, it is very likely to obtain a market value higher than the total net assets, that is, the price of the stock in the market is higher than the net assets of the unit stock.Therefore, as long as the company's operation improves and the stock price rises after the listing, the shell buyer will be able to control a higher stock market value and own more wealth.After a certain period of lock-up period, it is possible for these wealth to be sold and cashed in the Western stock market.At present, legal person shares in my country's stock market cannot be circulated in the secondary market, but it is also possible to achieve full circulation in the future.At that time, domestic shell buyers can also try to make the stock price stronger through asset reorganization and improvement of operation and management, and obtain the opportunity to sell some stocks in the secondary market and earn the price difference.

Listing through a shell is often faster than an initial public offering.It can even be done in less than two weeks, and tradeable in less than 30 days.Even if relevant declarations need to be amended, the speed of listing through buy-backs is still faster than listing under underwriters.If the shell company is already listed and traded, the shares will be listed and traded soon after the merger.In addition, if the company wants to be listed and traded on another exchange, it must also declare and obtain approval.In terms of cost, the price of a shell company can be as low as 50 to 60 US dollars, as high as several million US dollars.In addition, the legal fees and accounting fees for listing may be as high as 25 to 30 US dollars, and the underwriting commission can reach 7% to 12%.

After successful listing through shell buying, the shell buyer can change the stock abbreviation of the listed company, which will help expand the company's popularity, publicize its image, and bring advertising benefits.In addition, individual shell buyers also hope to reorganize private companies into public companies, introduce external shareholders, improve the company's corporate governance structure, and achieve better development through buying shells for listing.

Buying a shell listing is not limited to the domestic main board, and overseas listing is also a way.There are two ways to find listing on the US stock market: one way is that Chinese companies issue stocks in the US stock market through Initial Public Offering (IPO); A company with assets or a shell company without assets, and then inject existing assets and performance into this listed company, and list it on the market, which is the so-called shell listing.

In a typical shell listing, a currently operating company (the shell company) merges with a publicly traded company (the shell company). The shell company becomes a legally surviving entity, but the shell company's operations are not Affected.The shareholders who buy the shell company have made arrangements with the shareholders of the shell company in advance to obtain the controlling rights of the shell company.Shareholders of the shell company can now enjoy all the benefits of a public company, and shareholders of the public company now own valuable shares of the combined entity with the potential to increase in value.

The basic operation idea of ​​buying a shell listing: a non-listed company selects and acquires a listed company, and then uses the listing conditions of this listed company to inject other assets of the company into the listed company through allotment, acquisition, replacement, etc.

First, select shell companies that are eligible for selling among listed companies.The selection of a shell company is the first step in the operation of buying a shell and listing, and it is a crucial link in the whole process.Whether the shell company is selected correctly or not will directly affect whether the merger and acquisition can achieve the final success.Then the analysis of the characteristics of the shell company is extremely important.The rationality and company value determined by the shell company are closely related to the holding cost of buying the shell company.

Second, analyze the share capital structure of the shell company, and contact the legal person shares and state-owned assets representatives who intend to transfer the shares.

Third, after the shell buyer obtains the status of the largest shareholder, it reorganizes the board of directors.

Fourth, inject high-quality assets into the shell company to make a qualitative leap in the asset quality and operating performance of the shell company, and at the same time recover the investment as soon as possible.

So, what are the main points to be grasped in the operation of buying a shell for listing?

It is very important to choose a good shell, which directly determines the success or failure of the entire operation.There is a reason why a shell becomes a shell. Whether it is because of unclear strategy, poor management, or the deterioration of the external market and competitive environment, the process of a company becoming a shell is often a process in which the company struggles tenaciously for survival and does everything it can.It is quite normal for financial black holes, hidden debts and even legal proceedings to appear during this process, so there are very few truly clean shells in the market.In this case, if the company that buys the shell enters rashly without professional, rigorous and detailed investigation, it is likely to fall into a well-designed financial trap.

Since the tradable shares of listed companies in my country’s Shenzhen and Shanghai stock markets account for a relatively low proportion of the total share capital, most shell buying in my country is achieved through the purchase of non-tradable shares, the most common of which should be the transfer of legal person shares by agreement between different legal persons .

The payment methods in shell transactions include cash payment, asset replacement payment, debt payment, mixed payment, zero-cost acquisition (mainly in the form of free transfer of state-owned shares) and equity payment.

In some cases, we use "backdoor listing" and "backdoor listing" together, so there may be no price involved in the shell transaction and no payment.For example, when Chuangzhi Software acquired the listed company "Wuyiwen", the largest shareholder of "Wuyiwen" used its legal person shares of "Wuyiwen" as capital contribution to establish a joint venture with Chuangzhi. owns 51% of the shares.In this way, Chuangzhi indirectly became the largest shareholder of "May [-] Wen" by controlling the joint venture company absolutely, and then injected into the computer software business, replacing the original commodity circulation business.

Asset restructuring is generally carried out after the acquisition of the shell, or at the same time as the acquisition of the shell, but in some cases it is carried out before the acquisition of the shell.The business innovation of shell buying and listing is mainly in the two links of shell buying and asset restructuring.After buying the shell, the "new owner" (new controlling shareholder) of the listed company has to inject a new "entity and soul" into the "shell" (that is, the listed company), that is, inject high-quality assets into the shell company, and transfer the original assets of the shell company. The replacement or suppression of non-performing assets will cause a fundamental change in the fundamentals of the shell company (main business, financial status, asset quality, etc.).If the listed company's performance can be improved and maintained at a relatively good level, the listed company will have the opportunity to carry out allotment of shares or refinancing, or can secure listing qualifications.

There are many ways to reorganize assets, but the same thing remains the same, which is to find a way to put new assets into listed companies.How to pretend it?

One of the main methods is to let the listed company spend money to buy the assets of the new controlling shareholder (the shell buyer), or let the listed company replace the original assets with the assets of the new controlling shareholder (the shell buyer). transactions between shell buyers;
The second main method is to conduct transactions between the listed company, the original controlling shareholder (the shell seller) and the new controlling shareholder (the shell buyer). For example, the shell buyer exchanges new assets and a certain combination of cash or equity for the seller The shell seller holds the controlling stake in the listed company, and the shell seller then replaces the new assets just acquired with the old assets of the listed company.

It is important to remind here that after a company buys a shell company, there will often be conflicts with the original management model of the shell company. There must also be a psychological preparation to stop the decline in the company's performance.

(End of this chapter)