Why Private Placements Are All the Rage in China

China Daily: China share offerings decline sharply in first half of 2016

The number of initial public offerings and the amount of funds raised in China's A-share market fell sharply year-on-year during the first half of 2016, according to statistics released by PwC on Monday.

During the period, 61 IPOs were completed in the A-share market, raising 28.8 billion yuan ($4.3 billion), representing declines of 67 percent and 80 percent respectively from a year earlier.

The steep fall was caused by combined factors including the global and Chinese economic slowdown and China's tightening of IPO regulations amid stock market fluctuations, said Frank Lyn, leader of PwC's mainland and Hong Kong markets section.

While IPOs are down, private placements are up.
Reuters: China Eastern raises $1.3 bln in private share placement

China Eastern Airlines Corp has raised 8.55 billion yuan ($1.28 billion) in a private sale of shares to a group of investors including China's biggest online travel agency Ctrip, which becomes the airline's fifth-biggest shareholder.

China's second-largest carrier by passenger numbers will use 6.83 billion yuan of the proceeds to purchase new aircraft, and 1.71 billion yuan to repay bank loans, it said in a filing to the Shanghai Stock Exchange on Tuesday.

The Economic Observer headline says 328 companies have raised 822 billion yuan in the first half of 2016, which is an increase of 188 percent over the first half of 2015.
围观A股定增井喷全景图：328家公司融资8219.68亿

Number and value of private placements by month

"From the point of view of listed company level, set by the popular reason is that, due to the rise of the cost of traditional industries want to upgrade the power through mergers and acquisitions, and new industries through M & A hopes to master the latest technology to achieve a complete industrial chain now listed companies' Resources are still scarce, or the existence of rent-seeking. "associate analyst in the Research Institute of investment Ma Jing said.

Analysis shows that the first half of 2016, the completion of the private placement of 328 A-share companies, Suning Appliance (002024.SZ), violet shares (000938.SZ), Shanghai Pudong Development Bank (600000.SH), Perfect World (002 624. SZ), several companies set by the amount of financing more than 10 billion yuan.

Among them, Suning Appliance (002024.SZ) single set by the scale of 29.233 billion yuan for the first half of the largest increase in a given case. The constant increase, including Taobao (China) software, EMC - Suning No. 2 participate in the subscription. Suning Appliance 29.233 billion yuan financing platform is mainly used for the construction of logistics, Suning Tesco store cloud development, Internet banking projects, IT projects and to repay bank loans and supplement working assets.

By far the largest fundraisers are in the manufacturing sector. "Other" is the second largest, followed by IT.

Why are investors preferring private placements? The average "profit" on private placements (difference between last trading price and the placement price) has been 44.21 percent in 2016.

The company at the top of that table, with a 416 percent increase, is Oriental Times Media (002175).

Oriental Times Media Corporation, formerly Guilin Guanglu Measuring Instrument Co., Ltd., is mainly engaged in the research, development, manufacture and sale of measuring instruments. The Company’s products include digital calipers, micrometers, indicators, digital display instruments, vernier calipers and other products. The Company distributes its products in domestic market and to overseas markets. Through its major subsidiary, the Company is also involved in the manufacture of various precision measuring instruments, including indicators, lever-type indicators, thickness measuring calipers, inner diameter calipers, dial calipers and other products.

Last summer: Guilin Guanglu Measuring Instrument changes company name to Oriental Times Media Corporation

Guilin Guanglu Measuring Instrument Co Ltd:Changed company name to Oriental Times Media Corporation. Effective July 13.

Oriental Times Media issues new shares via private placement and announces shareholding structure change

Oriental Times Media Corporation:Says it issues 59,348,859 new shares via private placement at 9.95 yuan per share and raises 590,521,147.05 in total.Says a Ningbo-based investment center (limited partnership) to raise stake in the company to 6.71 pct from 0 pct. Says a Nantong-based investment center (limited partnership) to raise stake in the company to 6.71 pct from 0 pct.

They issued shares at 9.95 yuan a piece, when shares were trading for more than 50 yuan. The placement was announced April 12, shares traded at 46.09 yuan when halted on May 6.
Oriental Times Media plans film project worth 150 mln yuan
Paying 10 yuan per share for a stock trading at 50 yuan sounds like a great deal (and maybe a crooked one at least in the moral sense of having a duty to all shareholders). Then again, an investment in an instrument company (as of a year ago) that's dropping 30 percent of funds raised into a movie project deserves a high discount. Probably 100 percent.