Recently, the "pig brother" Makihara shares frequently searched, first throwing out the equity incentive plan to trigger a hot discussion in the market, and then there was "gossip" that Makihara shares generally reduced wages, up to 40%, causing public concern. Although Makihara shares subsequently debunked rumors that the rumors of salary cuts are not true, the rumors will not be empty, and the market fluctuations in the pig breeding industry are obvious to all.
Makihara shares have been jokingly called "pig mao" by investors, and the stock price has risen all the way after listing, reaching a peak of 92.5 yuan / share in early 2021, with a market value of nearly 500 billion yuan. Now the stock price has fallen, but the market value is still more than 300 billion, which is a veritable "pig brother".
2021 is a year of "Waterloo" for the pig farming industry. The Ministry of Agriculture and Rural Affairs recently released data showing that the average price of pork in the national bazaar market in 2021 is 33.61 yuan / kg, down 36% from 2020.
The decline in pork prices has made the performance of the pig breeding industry not optimistic, and some enterprises have suffered losses. Although Makihara shares can still maintain profitability, profit expectations have also been greatly narrowed. According to the company's performance forecast, it is expected to achieve operating income of 77 billion yuan to 80 billion yuan in 2021; and net profit attributable to shareholders of listed companies of 6.5 billion yuan to 7.632 billion yuan, down 70.86% -76.32% year-on-year.
In the case of the industry downturn, how to maintain the enthusiasm of employees and improve the efficiency of the company is a common problem faced by Makihara and other pig breeding companies.
In view of this, the solution given by Makihara shares is equity incentives.
Makihara share equity incentives
According to the announcement of Makihara Shares, the 2022 Restricted Stock Incentive Plan (Draft), the Company intends to grant 81.0807 million shares to more than 6,000 people at a grant price of 30.52 yuan per share. Based on the latest closing price (58.54 yuan / share), the granted share represents a return of 2.272 billion yuan, which is evenly distributed to each person, which is equivalent to a floating profit of 370,000 yuan per capita (excluding tax).
| Total amount of incentives
Futu ESP found that the incentive tool adopted by Makihara's incentive plan was restricted stock. The source of the shares is the company's targeted issuance of A shares of common shares to the incentive recipients.
The number of restricted shares to be granted under the Plan is 81,080,700 shares, representing 1.54% of the total share capital of the Company of 5,235,859,000 shares at the time of the signing of the Incentive Plan. Among them, 64.8645 million shares were granted for the first time, accounting for 80% of the total number of restricted stock grants, and 16.2162 million shares were reserved, accounting for 20% of the total number of restricted stock grants.
| Grant conditions
Futu ESOP learned from the announcement that Makihara shares set performance appraisal conditions for the equity incentives in this period, including performance appraisal at the company level and performance appraisal at the individual level.
At the company level, Makihara shares take the sales volume of pigs as the assessment target. If the growth rate of pig sales in 2022 reaches 25% compared with 2021, the first batch of equity incentives can be unlocked, and the growth rate of pig sales in 2023 will reach 40% compared with 2921, and the second batch of equity incentives can be unlocked.
Image source: Makihara share announcement
At the individual level, the company will score/rate the comprehensive evaluation of the incentive object in each assessment year, and determine the proportion of the incentive object according to the assessment results of the incentive object. If the incentive recipient is assessed as "A" or "B+" in the previous year of the unlocking period, all restricted shares can be unlocked, and the remaining levels can be partially unlocked.
| Grant object
In terms of specific distribution objects, we can see that the incentives granted by executives such as vice presidents and financial leaders are not high, and I believe that Makihara shares are really aimed at motivating core technology and business personnel, so that excellent employees can grow together with the company.
| Blackout period
The restricted shares granted by Makihara shares were lifted in two installments. The "first release period" is 50% for 12 months to 24 months from the date of the first grant of registration, and the second period of lifting the restriction is 24-36 months, and the proportion of the restriction is the other 50%.
Is it effective to motivate employees with sales?
The outside world's doubts about the equity incentive of Makihara shares are mainly that on the one hand, the company's performance appraisal indicators are too easy to achieve, and under the premise of a sharp decline in pork prices, sales volume growth seems to be easy to achieve. In addition, the company granted shares to executives and core employees at half the price, and the intention of the reward was too obvious, and the unfair value share award may also lead to a decline in the company's stock price.
But in fact, the outside world does not need to question this too much. From the perspective of equity incentive plans of other companies in the past, the company's performance indicators are more used to motivate senior management, and for most of the middle and grass-roots employees, it is difficult for them to have much impact on the company's performance by their own efforts.
As for the half-price grant of shares, it is also a major feature of A shares. For Hong Kong and U.S. stocks, RSUs that grant employees zero consideration are very common operations. A shares limit the grant price to 50% of the fair value. If the grant price is lower than this, "the listed company shall engage an independent financial adviser to express opinions on the feasibility of the equity incentive plan, the reasonableness of the relevant pricing basis and pricing method, whether it is conducive to the sustainable development of the company, and whether it harms the interests of shareholders." ”
In the past two years, the relevant provisions of equity incentives for A-shares have been continuously adjusted, and the flexibility is getting higher and higher, and it is getting closer and closer to the regulations of capital markets such as Hong Kong and the United States. At the same time, more and more companies are willing to share the value of the company's growth with their employees. Makihara shares this move, I believe is in line with a very good intention of the original intention, hope that employees can unite with the company, together through the industry cycle. For the effect, we are also willing to expect something.