Targeted fundraising market is generally sluggish with sharply reduced returns; PE/VC interest wanes

　　After a nearly month-long adjustment in the broader market, the stock prices of most individual stocks have also fallen accordingly. This has left specific parties participating in this year's private placement offerings with no choice but to watch their stock prices plummet, as their shares are not yet unlocked. Data from Wind Information shows that among the 42 listed companies that have implemented private placement offerings this year, 18 currently have stock prices below their private placement prices, with 15 of these stocks seeing their latest prices fall by more than 10% compared to their private placement prices.
　　Starting at the end of 2010, A-shares experienced a year-long significant decline, which directly led to a substantial drop in the issuance prices of listed companies that raised funds through private placements in the secondary market. PE firms, known for their keen market sense, naturally did not miss this opportunity.
　　A partner at a large domestic PE firm told a reporter from the First Financial Daily that last year, the pricing for private placements was typically 90% of the average trading price of the stock in the 20 trading days before the suspension of trading, and after subscription, a one-year lock-up period was sufficient before selling on the secondary market for profit. In contrast, at that time, the financing quotations for companies in the Pre-IPO stage reached as high as 30 times PE, far exceeding the secondary market valuations of many listed companies at the time. More importantly, participation in the financing of these companies involved uncertainty regarding whether and when they would go public. Therefore, after weighing the price and exit strategy, participating in private placements in the secondary market became one of the profit models for many PE firms.
However, this situation seems to have changed somewhat this year.
　　Data from ChinaVenture shows that in May of this year, 12 A-share listed companies implemented private placement plans. While the number of companies increased by 33% month-on-month, it decreased by 20% year-on-year; the total amount of funds raised was 9.75 billion yuan, a 24% decrease month-on-month and a 61% decrease year-on-year. At the same time, 39 A-share listed companies announced private placement plans, a 26% decrease month-on-month, but a 200% increase year-on-year; the projected total amount of funds raised was 72.32 billion yuan, a 68% increase month-on-month and a 46% increase year-on-year.
　　According to this data, although the number of companies implementing private placements in May was higher than the previous month, the overall financing scale decreased. ChinaVenture believes that the main reason is the smaller amount of funds raised in single transactions in May. In terms of single transaction amounts, the average amount of funds raised by the 12 companies that implemented private placements in May was only 810 million yuan, a new low for the year.
　　Regarding the returns from private placements, ChinaVenture's statistics show that the average return rate on the first day of listing for the 12 listed companies that completed private placements in May 2012 was 16.2%, remaining at a relatively low level.
　　Given this situation, the report also shows that due to factors such as the overall sluggish private placement market, the high rate of post-unlocking price drops, and the frequent introduction of new IPO policies, the enthusiasm of VC/PE (venture capital/private equity) institutions for private placements has weakened. In the first four months of 2012, private placement cases involving VC/PE firms accounted for only 26.7% of all private placement cases during the same period, while the annual participation rate of VC/PE firms in 2011 was as high as 48.6%.