Operating in highly concentrated market
Higher level of insider ownership and asset
Low level of leverage and liquidity
* IPO may exhibit a higher level of liquidity - evidence reported by Gleason et al. (2006) suggests that RTO firms tend to have lower liquidity than matched IPOs. * RM firms tend to be smaller and are still operating at a developmental stage
1) BDL does not require disclose of the information and undertake no capital raisings. 2) The size of the BDL and IPO firms is ambiguous
3) BDL transactions are involved with more cashing-out activities by private firm owners 4) No significant underpricing among the two
1Traditionally, a private company went public through a front door listing, also known as an IPO process. However, there is alternative method for Gome to go public, which is the back door listing. 1
What is BDL?
BDL is a complex inter-corporate transaction by which an unlisted private-held firm, 1in this case, 1Gome, achieve a listing status through the 1corporate shell of publicly-listed companies. A BDL transaction is normally structured as a1 takeover of the private firm by the public company but in essence, the vendors of the private firm obtain 1control of the enlarged public shell (a reverse takeover) 1at the conclusion of the event.
How does BDL work?
To give us a more comprehensive picture of the mechanism of the back door listing, we have use the case study of Gome and take the advice of her financial advisors as a sample to illustrate how back door listing works. 1) Throughout 2000 to 2002, Capital Automation Holdings limited 0493.hk issued a net of 1.61 billion new shares and Mr. Wong used HK$233.154M to acquire the share at different price. Capital Automation also purchased three office properties in Bejing for HK$12M. At the end, Capital automation was renamed CHINA Eagle Group Company Limited. 2) Mr. Wong select a subset of the 139 retail...