Dongfang Yuhong Li Weiguo cut meat at a low position, can he fulfill his promise to more than 1,400 employees?
Text | Jin Wei
The much-talked-about Oriental Yuhong employee shareholding quilt turmoil has a new trend, and the actual controller sells shares to "make compensation".
On the evening of January 12, Dongfang Yuhong announced that Li Weiguo, the controlling shareholder and actual controller of the company, plans to reduce the company's shares by block trading no more than 50.369 million shares (accounting for no more than 2% of the company's total share capital), and the funds obtained from the reduction will be used to fulfill the commitment of the shareholding plan.
As for the reason for the reduction, Dongfang Yuhong said that according to the agreement, Li Weiguo will provide a guarantee for the funds of employees participating in the 2021 employee stock ownership plan, which is to protect the interests of employees in the stock ownership plan, effectively boost employee morale, and promote the sustainable, stable and healthy development of the company.
According to the closing price on January 12, the cash amount this time is about 914 million, but the real reduction will not start until 15 trading days later.
On January 15, Oriental Yuhong opened down 4%, and then recovered slightly, as of noon closing, Oriental Yuhong reported 17.98 yuan, down 1%, with a total market value of 45.28 billion.
The original employee stock ownership plan price of Dongfang Yuhong was 56.65 yuan per share, with a total amount of 2.759 billion, and now it is 17.98 yuan, a decline of 68%. However, Li Weiguo has a thorough understanding of the shareholding plan, and now, to the point of selling shares, can Li Weiguo's promise to more than 1,400 Dongfang Yuhong employees still be fulfilled?
Employee Stock Ownership Plan (ESOP) boss covers
Dongfang Yuhong is a manufacturer of building waterproof materials, known as "waterproof mao". Dongfang Yuhong has formed a building materials system service provider with the main waterproof business as the core, and the extension of civil building materials, mortar powder, architectural coatings, energy-saving thermal insulation, adhesives and other diversified businesses.
At present, Li Weiguo holds 571 million shares of Dongfang Yuhong, accounting for 22.69% of the company's total share capital, with a market value of about 10.369 billion, but half of Li Weiguo's shares are pledged.
Oriental Yuhong's employee stock ownership plan began in 2021, when the stock price was at a high level.
On March 27, 2021, Oriental Yuhong disclosed the "2021 Employee Stock Ownership Plan (Draft)" for the first time, with 1,611 participants and no more than 1.7 billion yuan planned to be raised. After the establishment of the employee stock ownership plan, asset management/trust products will be established for management, and it is planned to achieve a ratio of financing funds to self-raised funds not exceeding 1:1 through margin financing and securities lending and other methods permitted by laws and regulations, that is, the financing amount shall not exceed 1.7 billion yuan.
Oriental Yuhong's employee stock ownership plan has a threshold, that is, the employee's annual performance meets the standard. The final participants were 1,411 people, including 8 directors, supervisors and senior managers, and 1,403 middle managers and other core employees.
According to the company's announcement, the source of funds for the employee stock ownership plan is wages, loans, loans, etc. Many employees of Dongfang Yuhong reported that in order to complete the employee stock ownership plan, they borrowed money from relatives and borrowed from banks. In addition, Haitong Securities provides securities services for the purchase of securities on margin for employee stock ownership plans, and the ratio of employee self-raised funds to financing funds is 1:1.
On June 23, 2021, Dongfang Yuhong's 2021 employee stock ownership plan was implemented, and a total of 49.47 million shares of the company were purchased, accounting for 1.96% of the company's total share capital, with a total transaction amount of 2.759 billion yuan and an average transaction price of 55.78 yuan per share. In other words, more than 1,400 participating employees bought nearly 2 million per person.
Among them, 15 million shares were sold by Li Weiguo, and according to the announcement, the average transaction price of 15 million shares sold by Li Weiguo was 53.79 yuan per share, with a total cash amount of about 807 million yuan.
In order to strengthen the incentive, Li Weiguo promised to increase his holdings and said that if the annualized rate is less than 8%, he will compensate 8% of the interest.
Many employees of Dongfang Yuhong saw that the boss had a fixed interest compensation of 8%, and they also had a bottom in their hearts, and they happily participated in this high-leverage game.
However, the stock ownership plan has not kept up with the changes. In October 2022, Oriental Yuhong fell to a minimum of 22.5 yuan, although there was a wave of rebound in the middle, it will continue to hit new lows in 2023, falling all the way below 20 yuan, to today's low of 18 yuan. If calculated at a higher point, Dongfang Yuhong's market value has shrunk by 115 billion.
The market value has shrunk by 100 billion yuan, and it has been on the hot search many times
The company's market value has shrunk dramatically, and the employee stock ownership plan is naturally a huge loss.
In October 2023, Zhang Bei, secretary of the board of directors of Oriental Yuhong, posted a "12 Questions for the Soul" in the circle of friends, in this short essay of nearly 800 words, Zhang Bei used a series of questions to express her confusion and doubts about the continuous decline in the company's stock price. Zhang Bei sent out a soul torture question: "Why did our company's stock price fall so badly?" "Dongfang Yuhong has good performance and business prospects, why does the market turn a blind eye to this?" "What is wrong with this world?"
Zhang Bei's soul question was raised, and Dongfang Yuhong's stock price did not stop falling.
In November 2023, "Oriental Yuhong employees caused more than 1,400 employees to lose more than 1.5 billion" on the hot search. Since the employee stock ownership plan doubled the leverage, the decline reached 50%, and the principal was lost, which means that the principal of 1 million per employee participating in the stock ownership plan at that time was gone.
Some employees of Dongfang Yuhong said that the employee stock ownership plan had requirements for employees at that time, and now they have not recovered the principal after leaving for more than a year. There are also employees who are asking the chairman of the board of directors, asking when the chairman of Dongfang Yuhong will be able to fulfill his promises, and can he compensate some employees after cashing out so much money?
Due to the huge loss of the employee stock ownership plan, the market questioned the liquidation of the employee stock ownership plan. At that time, Dongfang Yuhong responded through the interactive platform: The employee stock ownership plan in 2021 has not been liquidated, and the actual controller Li Weiguo has provided a credit enhancement guarantee for the employee stock ownership plan, and there is no need to supplement the margin.
Dongfang Yuhong still emphasizes that after all the shares in the liquidation stage of the employee stock ownership plan are realized, if the annualized rate of return of the employee's own (self-raised) funds calculated according to the final amount that can be distributed to the employee is less than 8%, Li Weiguo will make up for the principal of the employee's own funds.
Can the promise of 1400 employees still be fulfilled?
In the past two years, Dongfang Yuhong's life has not been easy.
In terms of performance, from 2019 to 2022, Dongfang Yuhong achieved revenue of 18.1 billion, 21.7 billion, 31.9 billion, and 31.2 billion respectively, and net profit of 2.06 billion, 3.39 billion, 4.2 billion, and 2.12 billion respectively in the same period.
In the past two years, Dongfang Yuhong's net profit has declined sharply, and in 2022, Dongfang Yuhong's gross profit margin will fall to 25.77%, the lowest level in ten years, down 15.61 percentage points from 30.53% in 2021.
In the first three quarters of 2023, Oriental Yuhong achieved operating income of about 25.36 billion yuan, a year-on-year increase of 8.48%, and net profit attributable to the parent company of about 2.353 billion yuan, a year-on-year increase of 42.22%. However, the company's net cash flow from operating activities was -4.76 billion yuan, and accounts receivable increased to a new high of 15.1 billion yuan.
Dongfang Yuhong said in the 2023 semi-annual report that the scale of the company's operating income has increased year by year, and the accounts receivable have risen accordingly, and there is a possibility that bad debts will affect the company's operating performance due to bad debts in accounts receivable in the future.
In the context of such performance, the company's stock price continued to hit new lows, and the company's actual controller launched a large-scale shareholding reduction plan at a low level. The actual controller's reduction of holdings is undoubtedly a big negative for the weak stock price, and the operation of calling on employees to increase "leverage" at the beginning has also become a "shackle" for employees.
In the face of the pressure of public opinion inside and outside the company, Li Weiguo's pressure can be imagined. At the beginning, when the employee stock ownership plan was implemented, Li Weiguo cashed out 800 million, and now he is reducing his holdings at a low level, and the reduction price is very different.
The 2.759 billion employee stock ownership plan, the purchase price is 56.65 yuan per share, according to the current stock price, the decline has reached 68%, and the overall floating loss of the employee stock ownership plan of Oriental Yuhong has reached 1.876 billion yuan. This also means that Li Weiguo needs to compensate employees for at least 1.8 billion yuan, not including 8% annualized income, if you count 8% annualized, the compensation amount will have to be added to more than 500 million.
However, at present, the number of employee shares of Oriental Yuhong has been declining. According to Dongfang Yuhong's third quarter report in 2023, the number of shares held by the employee stock ownership plan is 38.1757 million shares, a decrease of 11.296 million shares from 49.4717 million shares in the 2022 annual report. On November 13 last year, the trading software showed that the employee stock ownership plan was no longer on the list of the top ten shareholders of Oriental Yuhong.
How much is the number of shares held by Dongfang Yuhong's employees, and how much compensation will be paid?
It is worth mentioning that at the beginning of 2023, Li Weiguo will be on the "2023 Hurun Report" with a wealth of 24 billion, ranking 214th in the country, but his wealth has shrunk by billions compared with previous years.
This time, Li Weiguo plans to reduce his holdings and cash out 900 million, can he fulfill his commitment to more than 1,400 employees?
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