Shenzhen Supervision Of The 34Th Share Repurchase: The "Bonus" Of The System And The Reform Of The Market

Recently, Gree Electric's second large share repurchase plan this year has triggered a hot spot in the market. The company's major shareholders proposed that the company use its own funds to buy back its shares. The total amount of repurchase funds should be no less than 3 billion yuan and no more than 6 billion yuan, mainly for employee stock ownership plan and equity incentive. In the previous repurchase, the company paid nearly 5.2 billion yuan to buy back more than 90 million shares. If implemented as planned, Gree Electric is expected to become the company with the largest repurchase amount in the A-share market this year.

This is only a microcosm of the "buy back fever" of Listed Companies in recent years. As we all know, share repurchase and cash dividend constitute an important way of profit distribution of listed companies, which is an important means for listed companies to optimize shareholder structure, improve corporate governance, implement M & A and enhance corporate value. Research shows that one of the main driving factors of the ten-year bull market in the US stock market is the continuous large-scale buyback of S & P constituent stocks. Taking apple as an example, since the subprime mortgage crisis in 2008, Apple has continued to buy back its own stocks in large quantities. In May this year, it announced that the board of directors authorized the stock repurchase plan to be expanded by 500 on the existing basis Billion dollars.

Back to the domestic market, the amendment of the company law in 2018 provides a legal basis for improving the share repurchase system, enriching the situation of share repurchase, simplifying the implementation of repurchase decision-making procedures, and establishing a treasury stock system. Subsequently, the regulatory authorities issued specific policies to optimize and improve the arrangement of A-share share repurchase system, which is also an important measure of capital market basic system reform in recent years. Listed companies have also given strong feedback on this. Since 2019, the number of repurchase plans disclosed has increased significantly compared with previous years, the amount of repurchase has reached new highs, and the role of share repurchase has become increasingly significant.

According to wind data statistics, since the beginning of 2020, more than 900 listed companies in the A-share market have issued repurchase related announcements and disclosed 174 repo reports, with a repurchase amount of more than 80 billion yuan. Among them, 97 listed companies in Shenzhen stock market disclosed repurchase reports, with a total repurchase amount of more than 40 billion yuan, accounting for more than half of the total. On the other hand, it also shows that high-tech, innovative and entrepreneurial enterprises embrace the new buyback Political enthusiasm continues to rise, and the practice of shareholder return culture is increasingly gathering. Especially in February and March, when the epidemic situation was most tense, 28 Shenzhen stock exchange companies actively issued repurchase plans to boost investors' confidence, which played an important role in maintaining the stability of the capital market during the epidemic period, and also reflected the management of listed companies' confidence in the company's future and national economic development prospects.

In particular, since the beginning of this year, the market has recovered. Some listed companies that have disclosed the repurchase plan have already exceeded the upper limit of the price disclosed in the repurchase plan. However, many companies still firmly raise the repurchase price and carry out the buyback plan to the end. Taking Midea Group as an example, according to the announcement on adjusting the upper limit of share repurchase price disclosed by the company on September 15, the company adjusted the original upper limit of repurchase price from 63.41 yuan / share to 75 yuan / share, with an adjustment range of 18.28%. Behind the adjustment of repurchase price cap is the company's gradually increasing market share and stable profitability. Up to now, Midea Group has issued repurchase plans for three consecutive years, with a total repurchase amount of nearly 10 billion yuan.

Midea Group transfers confidence in the company's operation and business development to the market by raising the share repurchase price. Investors are more willing to accept such a signal and become more and more firm to become the pursuers of the company's shares. Under the promotion of such positive feedback, the stock prices of listed companies have become more and more "beautiful".

Share repurchase itself is the embodiment of the strength of listed companies, and the use of repurchased shares for equity incentive or employee stock ownership plan can not only enhance investor confidence and strengthen value management, but also further improve the company's long-term incentive mechanism. Taking BOE a as an example, the company disclosed its buyback plan on August 29, proposing 250 million to 350 million shares, with a total repurchase amount of no more than 2 billion yuan. On the same day of the disclosure of the repurchase plan, the company simultaneously disclosed the equity incentive plan, covering 2974 core backbone members, and the stock source was the company's shares repurchased from the secondary market. By means of equity incentive or ESOP, the core employee's interests are deeply bound with the company's interests, so that they can change from passive "workers" to "operators" sharing the company's value, so as to maximize their enthusiasm.

As for the slow progress of stock repurchase of listed companies, which has always been criticized by investors, the pace of repurchase of listed companies has been significantly accelerated since this year. The first repurchase plan of Gree Electric Appliance mentioned above completed the established repurchase arrangement of RMB 5.2 billion in less than 5 months. After BOE a disclosed its repurchase plan on August 29, the repurchase amount of BOE a reached nearly 2 billion yuan by September 3.

It can be seen that the consciousness of A-share companies to repay shareholders through share repurchase is gradually forming, and the behavior of share repurchase is becoming more and more normalized.

But there are also some discordant voices in the buy back tide. According to wind data, since the implementation of the new repurchase rules, more than 20 companies in the market have experienced "zero repurchase". Taking a listed company in the auto parts industry as an example, the company disclosed its repurchase plan in July 2018, and planned to repurchase shares within 12 months, with a total amount of no more than 200 million yuan. In April 2019, it disclosed the announcement of termination of repurchase, saying that the company did not repurchase any shares during the repurchase period due to capital shortage and other reasons. Because the information of share repurchase is often beneficial to the company's share price, or it is regarded as a kind of commitment behavior by the market. If the company only publishes the repurchase announcement, but does not take the repurchase action according to the plan, it is likely to cause investors' loss or cause market fluctuation. Since 2020, the Shenzhen Stock Exchange has taken disciplinary or regulatory measures against 10 companies and relevant responsible persons. Among them, the repurchase amount of 7 companies is far lower than the lower limit of the amount disclosed in the repurchase scheme, two companies "zero repurchase", and one company repurchases during the sensitive period.

In addition to the implementation of the buyback plan, there are also some important shareholders of some companies who disclose the repurchase plan and the reduction plan at the same time, so that the public can call it "incomprehensible". For example, a listed company in a food industry disclosed its repurchase plan on June 8, saying that it plans to buy back no less than 113 million shares and no more than 226 million shares through centralized competitive trading with its own funds, and the repurchase amount will reach 1.469 billion yuan to 2.938 billion yuan. On the same day of the company's repurchase plan disclosure, the company's shareholders also disclosed the announcement of reduction. In this regard, the Shenzhen stock exchange immediately sent a letter of concern to the company, focusing on the feasibility of the implementation of the buyback scheme and whether there is cooperation with the directors, supervisors, controlling shareholders, actual controllers, shareholders holding more than 5% of shares and their persons acting in concert to timely inform the market of the risks.

Although the implementation of buyback plan of individual companies is flawed, it still can not cover up the positive changes brought about by share repurchase in the market as a whole. A number of high-quality blue chip companies represented by Midea Group and Gree Electric Appliance Co., Ltd. took out "real gold and silver" continuous repurchase, multiple repurchase, large amount repurchase and rapid repurchase. They insisted on giving back to investors through solid operation and continuous stability, thus forming a stable expectation on the market, providing valuation support for market-oriented blue chip bulls since this year.

At the same time, the regulatory authorities continue to guide listed companies to make good use of repurchase policies and standardize the order of repurchase market. Not long ago, the State Council issued the opinions on further improving the quality of listed companies, reiterating once again that listed companies should be encouraged to repay investors through cash dividends, share repurchase and other ways, so as to earnestly fulfill their social responsibilities. In the information disclosure assessment method released by Shenzhen Stock Exchange in September this year, share repurchase is regarded as an additional item in the information disclosure assessment of listed companies, so as to guide listed companies to enhance the consciousness of returning shareholders. In addition, in the implementation standard of disciplinary actions for listed companies which was made public to the market in June this year, the Shenzhen Stock Exchange has also included in the scope of disciplinary actions such as the company's failure to implement the repurchase plan in accordance with the contract.

?