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The IPO Pricing of High Technology Enterprises Based on Compound Real Options

Author: TanYaJun
Tutor: ZhouXiaoHua
School: Chongqing University
Course: Finance
Keywords: High-tech enterprises Causal compound real options Multivariate IPO
CLC: F224
Type: Master's thesis
Year: 2012
Downloads: 78
Quote: 0
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Since the world economic going into the stage of knowledge economy, thehigh-tech enterprises play an important part. In order to promoting the development ofhigh-tech enterprises and overcoming their problem in financing, our country opened upthe Growth Enterprise Market (GEM). For the new characteristic of the high-techenterprises that is different from traditional public company, it’s the most concerningtopic how to determine the IPO price of the high-tech enterprises among financialcommunities and investors.In this paper, firstly according to discuss the thesis、pricing method and applicationabout compound real options, we get the theoretical basis for the IPO Pricing ofhigh-tech enterprises. After comparative analyzing the Absolute Valuation method、Relative Valuation method、Economic Value Added model and Option Valuation methodfor high-tech enterprises, we figure out their applicable scope、 advantage anddisadvantage respectively. The Absolute Valuation method is suitable for the companieswhich operate stability and their future cash flow and the discount rate is predictable. Itis difficult to price the high-tech enterprises scientifically and reasonably, because theincome of the high-tech enterprises that gets from the operating flexibility could beignored. The Relative Valuation method is suitable for the companies whichdevelopment of the industry is mature and its calculation is simple. However, it isdifficult to find out a suitable comparable company in the market for the high-techenterprises. The Economic Value Added model is suitable for investment analysis areaand the Option Valuation method is applicable for the companies which development isquick but which future is not sure. The last two methods require the professionalassessment person because of a lot of complex calculation. Then we point out that thevaluation of high-tech enterprises combined with existing valuation and potentialvaluation after analyzing the value composition、influencing factor and uncertainty ofhigh-tech enterprises. The potential valuation could be affected by the enterprise assetscale、the enterprise technology innovation ability、the enterprise operation ability、growth ability of the enterprise market factors、policy factors、the industry factors、regional factors and so on. It is uncertain for the earning、research costing、opportunity、challenge and economic of the high-tech enterprise because of influence factors that ismentioned above. And the high-tech enterprise has the nature of the real options due to uncertainty.Finally, we study the life cycle of high-tech enterprises and the style of the realoption, combining with the previous analysis about compound real options andtraditional valuation methods. We get the causal compound real options withmulti-variables and multi-uncertainties pricing model about the high-tech enterprises. Inorder to improve the accuracy of the calculation, we introduce the model withtrigeminal tree model and EVA method. At last, we set the specific case of WuhanHumanwell Healthcare (Group) CO.,LTD to test the model accuracy and feasibility.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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