The capital market is like a game. If players only focus on the piece in front of them, they will inevitably be trapped in a dead end. The real masters are often well versed in the way of "creating momentum" and take off in the wind by leveraging capital tools. Financing, as the lifeline of the development of listed companies, is not only related to cash flow, but also determines the future growth space of enterprises.
However, the traditional financing model can no longer meet the rapid changes in the market. New models such as fixed increase, convertible bonds, SPAC, and Pre-IPO financing are emerging in an endless stream. How can companies take the lead in this capital game? Today, Goheal will take you to an in-depth interpretation and explore the gameplay and strategies of the new financing model.
Is traditional financing "old"? The rise of new capital gameplay
Financing has never been a multiple-choice question for listed companies. Although traditional means such as bank loans, public additional issuance, private additional issuance, and bond financing are stable, they often face problems such as strict approval, lengthy time, and equity dilution. As a result, the market has spawned a series of new financing tools, which are more flexible and market-oriented, but also contain hidden secrets.
1. Convertible bond financing: invisible capital leverage
Convertible bonds (Convertible Bonds, referred to as convertible bonds) are a type of bond with "option" attributes. Not only can companies raise funds at low cost, but investors can also convert them into shares in the future and enjoy the dividends brought by rising stock prices.
Typical case: Tesla's "magic financing"
Tesla has repeatedly used convertible bonds to finance capital expansion. For example, in 2019, Tesla issued $977 million in convertible bonds with a coupon rate of only 2.38%, far lower than the interest rate of ordinary bonds on the market. When Tesla's stock price soared, these convertible bonds were converted into shares by investors. The company not only successfully raised funds, but also avoided a high debt burden.
Goheal believes that the core of convertible bonds lies in the trend of corporate stock prices. If the company develops well, investors will choose to convert the shares, and the company does not need to repay the principal; if the stock price is low, the company will have to pay interest. Therefore, whether convertible bonds can be played well tests the company's market prediction ability.
2. Private placement: capital "new favorite" or equity "dilution"?
Private placement is a financing method for listed companies to issue shares to specific investors in a non-public manner, usually used for major mergers and acquisitions, business expansion or debt repayment.
Typical case: China National Nuclear Corporation's private placement to attract strategic investment
In 2024, China National Nuclear Corporation issued the "Plan for Issuing A-shares to Specific Objects", planning to raise 14 billion yuan for the construction of 8 nuclear power projects, of which the social security fund intends to subscribe 12 billion yuan and become its important strategic investor. After the completion of this private placement, the social security fund will participate in corporate governance as the company's second largest shareholder, improving the company's governance level and market competitiveness. At the same time, this cooperation is also seen as a new path for the deep integration of the nuclear power industry and long-term capital, which will help further connect relevant strategic resources and enhance the market confidence of enterprises.
But private placement is not a panacea. If a company blindly increases its private placement, it may cause equity dilution and cause dissatisfaction among old shareholders. Goheal suggested that companies should fully consider the balance between financing scale and equity structure to ensure that the private placement can truly empower corporate development rather than become a tool for short-term market speculation.
3. SPAC: A new channel to subvert traditional IPOs
SPAC (special purpose acquisition company) has become a hot spot in the capital market in recent years. Its model is: first set up a "shell company" to go public, raise funds, and then acquire the target company to make it go public quickly.
Typical case: Grab's SPAC listing journey
In 2021, Southeast Asian online car-hailing giant Grab was listed on the Nasdaq in the United States through the SPAC model, raising nearly US$4.5 billion. This method not only allows Grab to avoid the cumbersome review process of traditional IPOs, but also enables it to quickly obtain capital support during the epidemic.
However, SPAC financing also has potential risks. In recent years, some companies merged by SPACs have seen their stock prices fall sharply due to insufficient profitability, and investor confidence has been frustrated. Goheal reminded that SPAC is suitable for high-growth companies, but they still need to have a solid business foundation, otherwise they are likely to become "fast-moving consumer goods" in the capital market.
4. Pre-IPO financing: a capital accelerator before listing
Pre-IPO financing refers to the last round of financing before a company goes public, usually participated by private equity funds, institutional investors, etc., to help companies optimize their financial structure and improve their listing valuation.
Typical case: ByteDance's Pre-IPO layout
Before preparing for listing, ByteDance raised more than US$2.5 billion through multiple rounds of Pre-IPO financing, attracting top investment institutions such as Sequoia Capital, Softbank, SIG Haina Asia, DST, General Atlantic Capital, and Primavera Capital. This strategy not only helps the company obtain huge funds in advance, but also helps it to shape higher valuation expectations in the capital market.
However, Pre-IPO financing also has uncertainties. If the company's listing is blocked or the valuation does not meet expectations, investors may face exit difficulties. Therefore, when conducting Pre-IPO financing, companies need to formulate clear listing plans to ensure the long-term consistency of the interests of capital parties and companies.
Under the new capital model, how do companies make decisions?
In the new financing environment, companies should avoid blindly following the trend, but should choose the most suitable financing model based on their own business characteristics. Goheal suggested that companies can consider the following dimensions comprehensively:
1. Cost of capital: convertible bonds have low interest rates, but equity may be diluted after conversion; private placement financing is fast, but it may cause shareholders to worry about dilution.
2. Market environment: SPAC financing is easier to succeed when the market is hot, while it may be difficult to find suitable targets during the IPO downturn.
3. Company growth stage: Pre-IPO financing is suitable for companies that are about to go public, while early companies are more suitable for equity financing or private placement.
Conclusion: Which financing method is suitable for your company?
In the capital market, financing is not only the circulation of funds, but also an important part of the company's strategic layout. Choosing the right financing tool is like installing a capital "booster" for the company to let it take off in the wind. Once the wrong choice is made, it may fall into the dilemma of long-term low stock prices and rising financial costs.
So, what financing model do you think has the most potential in the future? Has your company encountered financing difficulties? Welcome to leave a message in the comment area and discuss new opportunities in the capital market with Goheal!
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global mergers and acquisitions. It has deep roots in the three core business areas of acquisition of controlling rights of listed companies, mergers and acquisitions of listed companies, and capital operations of listed companies. With its profound professional strength and rich experience, it provides companies with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
