Convertible Bonds Into The Short-Term Trading Scope To Reduce The End Of The Bonus Is Not Limited

With the entry into force of the new securities law, the dividend of convertible bonds will be terminated.

The forty-fourth provision of the new securities law stipulates that the companies that are traded by listed companies and other national securities trading places approved by the State Council shall have shareholders, directors, supervisors and senior managers who hold more than five percent shares. They will sell the shares held by the company or their securities with shares of their shares within 6 months after buying, or within 6 months after the sale. The company's board of directors should recover its earnings.

The revision has expanded the scope of short term transactions. Previously, the restricted objects of the short-term trading were only the shares held by the directors. However, the new securities law would extend the scope of the securities to the stock ownership securities, and the convertible bonds were also considered to be equity products with the nature of the conversion.

Twenty-first Century economic report reporter learned that the exchange level has already issued relevant cognizance to the organization and the company. This means that it has become a history that we can avoid the reduction of new rules through convertible bonds.

Unrestricted reduction into past tense

In the past 3 years, because the private placement is constrained by policy, convertible bonds have become a rising star in the refinancing market. The scale of financing continued to rise in the past few years, and by the end of 2019, the scale of financing for a single year has reached 247 billion 700 million.

The addition of fire to convertible bonds is also an important attribute. In 2017, when the new regulation was reduced, the use of convertible bonds could be reduced without the effect of periodic locking, and even a few days before the listing of convertible bonds could be completed.

"Large shareholders can get the share of convertible bonds with the priority placement system, and do not have any exit restrictions such as locking, so that they have a more convenient means to raise funds and a quick profit realization than the issuance, so the convertible bond market has become one of the best tools for large shareholders to reduce their holdings." A large brokerage firm in Beijing said.

For example, in 2019, Optima issued 14 million 950 thousand Optima convertible bonds, with a total value of 1 billion 495 million yuan. Among them, Yao Liangsong, the controlling shareholder of the company and his concerted action, subscribed for 9 million 227 thousand Optima convertible bonds, the subscription amount was 920 million yuan, and the subscription ratio was 61.72%.

After the listing of Optima's convertible bonds, the market ended with a suspension of trading, and the highest price reached 127.2 yuan. Compared with the 117.71% of the conversion price, the premium was over 7%.

However, after closing the first day of listing, Optima announced that it would receive 1 million 495 thousand copies of Optima convertible bonds, or 10% of the total issued by Yao Liangsong, the controlling shareholder. After the completion of this reduction, Yao Liangsong and his concerted persons held a total of 7 million 730 thousand Optima convertible bonds, accounting for 51.72% of the total issued. And if the price is calculated at 126.31 yuan of the closing price of the day, the largest shareholder will gain a profit of 39 million 930 thousand yuan on the first day of listing, and it will be less than half a month from the shareholders' priority placing day to the listing reduction.

But with the revision of the securities law, this game will become a complete history.

In fact, some market participants are still lucky enough to dispute whether equity securities include convertible bonds. However, reporters have learned that the exchange level has already issued relevant cognizance to the institutions and companies.

A notice from a listed company showed that the Shanghai Stock Exchange clearly pointed out that the forty-fourth article of the new securities law has made new provisions on the main scope of short term transactions, types of transactions and exceptions, and that shareholders of listed companies holding more than 5% shares and Dong Jiangao should strictly abide by them. If the aforementioned person violates the forty-fourth provision of the new securities law, the company's board of directors shall withdraw the proceeds from the sale of the shares held by the company (including its spouse, parents, children, and those held by others' accounts) or other stocks with equity nature, and timely disclose the illegal sale and purchase of relevant personnel, the treatment measures taken by the company, and the proceeds. The method of calculation and the specific circumstances of recovering the proceeds.

"The exchange has made it clear that convertible bonds are restricted products. When the directors of the listed companies are placing high priority, they must understand the new changes. Convertible bonds can no longer carry out the listing reduction." Beijing area a Shanghai Stock Exchange listed company's secretaries told reporters.

Issuing scale or affected

This new regulation will have a certain impact on the issuance of convertible bonds. People with investment banking told reporters that Dong Jiangao had begun to worry about the impact of the new regulation when the company placed a preference.

"Although the core purpose of issuing convertible bonds by listed companies is financing, no reduction restrictions really stimulate the demand of many listed companies issuing bonds. Now, under the influence of the new regulation, the enthusiasm of the directors in the priority placement will be greatly reduced, and it will also affect the issuance of convertible bonds to a certain extent. After all, the company's subscription to most of the convertible bonds is a common case. Beijing securities dealers said.

At the same time, the scale of convertible bonds is also restricted by another policy, that is, the revision of refinancing policy.

The revision of the refinancing policy has greatly relaxed the restrictions on the core elements of the private placement so that more companies can choose to increase channel financing. According to reporters' combing, since the refinancing of the new regulation has been released, many listed companies have abandoned and withdrawn the issuance plan of convertible bonds.

Zhou Yue, an analyst with state securities, said that once the new rules of "refinancing" landed "relaxed", the function of the substitution of fixed bonds would be weakened, which would reduce the financing demand of convertible bonds to a certain extent.

Over the past few years, the scale of convertible bond issuance has continued to rise. At the same time, the scale of convertible bonds products that are available for stock in 2020 is not small. However, under the influence of multiple factors, the scale of convertible bond financing can hardly be further broken.

However, with the development of these years, convertible bonds have become the mainstream refinancing choice of listed companies. Even if the scale can not be continuously improved, it is not difficult to maintain the current financing scale.

At present, the market also generally believes that convertible bonds and fixed increment are not two products that are completely substitutes for each other. In fact, the two products have their own advantages and disadvantages.

Zhou Yue also believes that convertible bonds will not be completely replaced, and its characteristics determine that the supply and demand for such assets still exist in the market.

He further analyzed: "for issuers, the biggest cost to the original shareholders is equity dilution, while the convertible bond conversion process is a continuous process. The pressure of equity dilution will be released evenly during the stock transfer period, and the issuing conditions of the convertible bonds are relatively simple, and the examination and approval is faster. For investors, convertible bonds have the irreplaceable allocation value for some specific risk preference investors because of their characteristics of "advance, attack, retreat and defend". Convertible bonds have no lock up period restrictions, they can be sold at any time in the two tier market, and the liquidity risk is small. At the same time, the existence of such clauses as convertible bonds has the natural advantages that other investment varieties do not possess.

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