During the year, 329 listed companies issued 346 repurchase plans-
What a surge in share buybacks
Reporter Li Hualin
As a basic institutional arrangement of the capital market, share repurchase has always been regarded as an effective means to help listed companies and investors interact benignly, and can convey to investors multiple information such as stable performance, abundant cash flow and good development.
Since the beginning of this year, the enthusiasm of listed companies to buy back has been high, some for equity incentives, some to boost stock prices, and some to return ordinary investors. However, at the same time, phenomena such as "show-making", "flickering" repurchase and "buying back and reducing holdings" still exist. Experts remind that investors should not blindly take repurchase as an investment standard, and should rationally look at the repurchase behavior of listed companies.
Bright development confidence
Statistics from market institutions show that since the beginning of this year, the repurchase heat of listed companies has increased. According to the data of Tonghua Shunifind, as of October 14, a total of 329 listed companies issued 346 repurchase plans during the year, an increase of more than 90% year-on-year; from the perspective of progress, 137 have been implemented and completed, with a completed amount of more than 46 billion yuan.
A number of companies have issued announcements that they will use buybacks to implement equity incentives or employee stock ownership plans. For example, Qingdao City Media Co., Ltd. recently announced that it will repurchase the company's shares in a centralized bidding transaction, with a maximum repurchase amount of 400 million yuan for the implementation of equity incentive plans; Shanghai Damingcheng Enterprise Co., Ltd. recently issued an announcement that it intends to repurchase shares for employee stock ownership plans or equity incentive plans, and the repurchase amount is not less than 100 million yuan and not more than 200 million yuan.
"Buying back shares is a manifestation of the company's affirmation of its own value and the confidence of development." Enterprises may carry out equity incentives through repurchases, boost the enthusiasm of employees, bind the interests of employees and enterprise interests, and tap the new potential of enterprises; or through repurchase cancellation, realize dividends to drive the enthusiasm of investors. Pan Helin, executive dean of the Digital Economy Research Institute of Zhongnan University of Economics and Law, said.
"Rescue" the stock price that continues to fall is another main reason for listed companies to buy back. For example, Shanying International Holdings Co., Ltd. issued an announcement in August that the closing price of Shanying International shares was lower than the latest net assets per share, and the current stock price could not correctly reflect the company's value, in order to maintain business development and stock price stability and protect the long-term interests of investors, it was planned to use its own funds to repurchase the company's shares in a centralized bidding transaction.
Tian Lihui, dean of the Institute of Financial Development of Nankai University, believes that when the company's individual stock prices are sluggish and some stock prices are even lower than their fair value, the repurchase of shares is a positive signal released by the company to the market, indicating that the company is optimistic about its own development prospects, so as to enhance investors' confidence in the company and make the company's investment value a reasonable return.
In addition, the reporter combed and found that while the number of listed companies implementing the repurchase plan increased, the scale of repurchase was also increasing, and many companies repurchased more than 10 billion yuan, mainly concentrated in household appliances, computers, medicine and biology and other industries. For example, Gree Electric Appliances has completed the third phase of the repurchase plan launched this year, with a total transaction amount of 15 billion yuan; as of August, Midea Group has completed two rounds of repurchase plans this year, with a total payment of more than 13 billion yuan. "Most of these companies are in a relatively mature stage of development, with abundant cash flow, which can ensure the sustainability of operations." Good performance, more cash flow combined with a reasonable valuation have led to a higher repurchase program. Pan and Lin analyzed said.
Strictly prevent "flickering" buybacks
The implementation of repurchase by listed companies can show confidence in their own development, and can also give back to investors and enhance trading activity. However, judging from past cases, there are also listed companies that use repurchase as a means to offset the company's negative news, and when the company breaks out negative news, such as performance explosion, the company's actual controller is suspected of insider trading and the investigation of the case, the stock price has fallen sharply, and the repurchase plan has been quickly launched.
Experts believe that the listed company's repurchase as an emergency measure to stabilize the stock price is not to blame itself, but it needs to comply with legal procedures and information disclosure requirements. "Buybacks are not a 'panacea', and if the company's intrinsic quality is poor and profit growth is insufficient, it is difficult to stabilize the stock price in this way for a long time." And once the owner of the company's internal information takes the lead in leaving the market, resulting in damage to the wealth of ordinary investors, it will eventually trigger investors to vote with their feet. Tian Lihui said that instead of rushing to launch a buyback plan, the company should work hard to improve operations and improve quality, and fundamentally eliminate investors' doubts.
There are also some listed companies that buy back "thunder and rain", and the actual repurchase amount is quite different from the plan, and there is a suspicion of "show", "flickering" repurchase. "For example, when the stock price was 60 yuan, some companies said that they would buy back at a price of no higher than 100 yuan, and the price gap between the two was too large, which obviously had the nature of fooling investors." Yin Zhongzhong, a researcher at the Institute of Finance of the Chinese Academy of Social Sciences, said.
"Share repurchases should be market actions carried out by companies based on their belief in their own development prospects, and should not become a means for the company's controllers to manage their market value." Tian Lihui said that some listed companies use repurchases to manage market value, through non-professional media or stock market black mouths, deliberately releasing false signals to the market, triggering market sheep behavior.
In order to prevent the occurrence of "flickering" repurchases and other behaviors, in recent years, the regulatory authorities have taken many measures at the same time to continuously improve regulatory measures. In January 2019, the Shanghai and Shenzhen Stock Exchanges issued the Implementation Rules for the Repurchase of Shares by Listed Companies, clarifying the practice of share repurchase and strengthening the rigid constraints on information disclosure; the new Securities Law implemented last year has greatly increased the administrative penalties for violations of information disclosure violations. In recent years, regulators have increased their supervision of relevant behaviors, and if listed companies engage in "surprise" and "show-style" repurchases, suspected of procedural violations and manipulation of stock prices, they will not only lose the trust of investors, but also may face regulatory sanctions.
Buying with the trend is not advisable
Although share repurchases have many benefits, they are not applicable to all listed companies, and listed companies must do what they can to implement repurchases. "For listed companies in the mature stage, with abundant liquidity and lack of better investment targets, repurchases are reasonable at this time to prevent idle funds." Long-term, start-up enterprises, in urgent need of a large amount of liquidity for research and development and expansion of production capacity, at this time buyback is not suitable for the long-term development of enterprises, nor is it the best way to solve the undervaluation. Pan and Lin said.
At the same time, the repurchase often has certain requirements for the cash flow of listed companies, if the strength of listed companies is not allowed, due to various reasons, it will not fully fulfill the commitments, which will not only trigger a crisis of trust among investors, but also may be subject to regulatory "special attention", which will have a negative impact on the development of the company. Since the beginning of this year, a number of companies have received regulatory letters for not completing the original repurchase plan. For example, in February this year, a listed company was issued a warning letter by the regulatory authorities due to the expiration of the repurchase period, and the actual repurchase completion amount accounted for only 15% of the lower limit of the repurchase plan amount, and was recorded in the integrity file.
In the face of the buyback boom of listed companies, investors are more concerned about whether this is a good time to enter the market. Experts believe that the repurchase of listed companies is not an inevitable signal of the rise in stock prices, and investors should calmly analyze the advantages and disadvantages of the company's repurchase and make a rational judgment.
"It is necessary to start from the actual operating conditions of the target enterprise, study the stage of enterprise development, and see whether dividends are suitable for enterprise development." If the stock price of a mature enterprise is depressed, the repurchase is conducive to the long-term development of the enterprise; for the growth period, it should consider whether it has continuous cash flow support. Pan and Lin said.
Yin Zhongzhong believes that investors should also be vigilant against listed companies buying back real money and silver at the same time, but the major shareholders are secretly reducing their holdings, which is suspected of violating the law. For example, in August this year, a company announced that it intends to repurchase the company's shares, the total amount of funds does not exceed 120 million yuan, only a few days later, the company issued another announcement to reduce its holdings, its major shareholders intend to reduce the company's shares, which can not help but cause investors to question, the company's repurchase is to raise the stock price so that shareholders can clear?
"In order to better protect the rights and interests of investors and prevent the occurrence of such phenomena, in the future, the regulatory authorities need to further improve the repurchase standards, strictly enforce the requirements of the letter, increase the punishment for 'flickering' repurchases, reductions while buying back, insider trading, etc., supervise listed companies to comply with discipline and law, and promote the healthy development of the capital market." Tian Lihui said.
Source: Economic Daily