An empirical study of Pre-IPO round investment returns of Chinese companies

Pre-Initial Public Offering(Pre-IPO) investment is an extremely important investment method in private equity investment. It invests in the latest stage of the company's listing time. In the context of Chinese stock issuance registration system reform, a large number of small and medium-sized enterprises with technological attributes and high growth potential have begun to conduct IPOs. As the last opportunity for companies to replenish their "ammunition" before going public, Pre-IPO investment has gradually become a hot topic in the practical and academic circles. This article collected four financial indicators that may affect the Pre-IPO investment income(including profitability, solvency, growth potential and governance structure) and used a multiple regression model to examine the mechanism. This article has three research conclusions: First, the Pre-IPO investment still has considerable returnsin the current market environment, but the rate of return is gradually decreasing. Secondly, most of the Pre-IPO return is brought about by the successful listing of the invested company, and the return on total assets, current ratio, and total asset growth rate have a significantly positive impact on primary market investment income, while the controlling shareholder's shareholding ratio has a negative impact. The income from secondary market is much less than primary market, and it is mainly related to the profitability and solvency of the invested company. Profitability has a negative impact on the stock price, while solvency has a positive impact; Thirdly, with the launch of the Science and Technology Innovation Board and the implementation of the Registration System, investment institutions need to conduct a comprehensive inspection of the invested companies, such as the company's growth and internal governance structure. Companies listed on the Science and Technology Innovation Board need to pay more attention to their profitability and growth,while others need to pay more attention to the debt solvency and governance structure.