On Protecting Shareholders in Private Equity Placement
Date Issued
2015
Date
2015
Author(s)
Pan, Ho-Feng
Abstract
Private equity placement has been introduced for decades. There was a ridiculous scandal that once the listed company, AMTC, placed a private equity placement at a price lower than 10% of the market price, so that excessively exploded its share capital and undermined shareholders'' property right. Exploring how poor the situation the shareholders encounter, I get data from TEJ+ and make a statistic from 2009 to this year, a period of about six years, on 524 private equity placement cases. The results suggest that issuers intend to price precisely above eighty percent of the reference price in the first place; secondly, about one-fifth to one-third of the original shareholders suffering loss from dilution after private equity placement would not get compensation from stock price even two years after the stock release. On comparing the United States, Australia and English law systems about private equity placement, shareholders protecting process could be divided into three categories base on timeline. Firstly, pre-emptive right makes it straightforward to get rid of dilution and property rights infringement; in the second place, setting bottom line of the price and ceiling of numbers of share offered reduces infringement; last but not least, excluding the related persons’ vote strengthens the power of the minorities. The stakeholders used to get interest at the cost of other shareholders’ property right by means of exploding share capital through private equity placement. Therefore, the key concept is to reduce the numbers of share exploded by setting bottom line of the price, or stop the stakeholders from profiting themselves or others at the minorities’ cost with voting exclusion. It would be clear and useful when steps into the way on protecting shareholders'' equity.
Subjects
private placement
equity instrument
dilution
special resolution
the related party
Type
thesis
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ntu-104-R00a41022-1.pdf
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