Analysis on the Motives and Effects of Corporate Spin-off Listing under the Registration-based System——A Case Study of Kelun Pharmaceutical Spinning off Kelun Botai

Abstract

After China's capital market reform of the registration-based system, the policy on corporate spin-off listing has been relaxed, making it an important tool for asset restructuring. This paper adopts the single case study method, event study method and financial indicator comparison method to study the reasons and results of Kelun Pharmaceutical's spin-off of its innovative drug subsidiary, Kelun Botai, for listing in Hong Kong under the registration-based system. The study finds that the main reasons for Kelun Pharmaceutical's spin-off are as follows: Kelun Botai needed a large amount of funds for research 安and development of innovative drugs from 2019 to 2021, with a cumulative loss of 2.48 billion yuan; the opportunity brought by relaxed policies; and the company's need for specialized operation and high-quality resource allocation. The spin-off announcement led to a significant short-term rise in the parent company's stock price, with a cumulative abnormal return of 12.3%, but the subsidiary faces valuation pressure due to continuous losses. In the long run, the spin-off can help both parties achieve specialized operation, but it also brings problems such as complicated management and balancing the interests of minority shareholders.