Fixed-price fundraising is good or bad?

Directed issue (referred to as fixed increase) has become one of the important ways for listed companies to raise funds. At the same time, the market has also been the pros and cons of the fixed-price fund-raising discussion. So, is the fixed-price fund-raising good or bad? This article will be analyzed from a variety of perspectives.

One, the advantages of fixed-income fundraising

Fixed-income fundraising compared to other financing methods, such as public offerings, share placements, has the following advantages:

1. Fast fundraising

Compared to the IPO and other financing methods, fixed-income fundraising process is relatively simple, shorter, faster fundraising, you can quickly obtain financing in a shorter period of time.

2. High flexibility

Fixed-price fundraising compared to public offerings, without having to follow the restrictions of the relevant regulations of the Securities and Futures Commission, there is a high degree of flexibility, and will not have too much impact on the company's share price.

3. Enhance the financing ability of listed companies

Fixed capital raising can improve the financing ability of listed companies, enrich the assets of shareholders, enhance the strength of the company, and provide a guarantee for future operation and investment.

Second, the shortcomings of fixed capital raising

Fixed capital raising also has some shortcomings:

1. Dilution of the original equity

Fixed capital raising can be fast fundraising, but it will also be diluted for the original equity. The capital raised is much larger than the company's original capital, the issuance of new shares will increase the number of outstanding shares, the new shares were issued, the company's interest in each common share will be reduced.

2. Will have a certain impact on the share price

Fixed-price fund-raising will be through the issuance of new shares to make up for the listed company's capital shortfall, but before the fixed-price program is announced, the market lacks of expectations for the supply of shares after the issuance of the fixed-price fund-raising program is announced will generally have a certain impact on the company's stock price.

3. May trigger investor questions

Most of the funds for the new issue are guaranteed by subscription agreements, which is also a way of fixed-price increase, and some of these subscription agreements are subscribed by national institutions such as anti-sedimentation and social security, but they may trigger investor questions.

Third, conclusion

In summary, fixed-income fundraising has both advantages and disadvantages, should be based on the actual situation of the company to choose, according to the specifics of the fixed-income program and the market supply and demand to determine the number of shares to be issued, the way of subscription, the issuance price and so on. In addition, the impact on the company's market value needs to be continuously observed, but overall, fixed-price fundraising can provide a good financing channel for listed companies, but at the same time, the use of fixed-price funds should be strictly regulated to prevent the emergence of irregularities.