This year, listed companies have shown a high enthusiasm for repurchasing shares, mostly for employee stock ownership plans or equity incentives. As of8month4day, as of8month4Today, within the year878homeAThe number of listed companies repurchasing shares increased year-on-year23%; The total repurchase amount reached678Yuan billion, a decrease year-on-year.
What are the main purposes of listed companies actively repurchasing shares? Why has the number of participants increased significantly this year? Why has the number of companies on the Sci-tech Innovation Board and strategic emerging industries that have started repurchasing surged this year? What are the reasons why companies on the main board that are repurchasing stocks mainly focus on major industries such as pharmaceuticals, biotechnology, electronics, and computers? Frost & SullivanFrost & Sullivan,Lu Jing, Partner and Managing Director of Greater China at Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan'), was interviewed by Securities Daily to discuss the reasons behind the high enthusiasm of listed companies in the repurchase market for shares.
Securities Daily
Since the beginning of this year,AThe enthusiasm for share repurchases among listed companies is high.8month3Yesterday, Kailaiying issued an announcement proposing to invest4Yuan to8The company has repurchased hundreds of millions of yuan worth of shares, which will mainly be used for subsequent equity incentives.
According towindInformation data statistics, as of8month4Today, within the year878homeAThe number of listed companies repurchasing shares increased year-on-year23%; The total repurchase amount reached678Yuan billion (Note: The repurchase amounts mentioned in the text refer to the completed portion), which has decreased compared with the same period last year.
The reporter from Securities Daily further sorted out and found that compared with previous years, this year's repurchase market has shown a new feature: strategic emerging industry companies have emerged in large numbers, with a year-on-year increase exceeding7Multiples. This reflects the accelerating expansion of companies listed on the Sci-tech Innovation Board and Beijing Stock Exchange, as well as the importance placed by these companies on a stable management team and core talents.
Strategic emerging industry companies have a strong willingness to repurchase
Same period last year2021year1month1day after tomorrow8month4On the same day, Gree Electric Appliance and Midea Group repurchased shares respectively for a total amount of169yuan,123Yuan billion, in total292yuan, accounting for the total current period33%In comparison, this year's repurchases were mostly concentrated in the '1 billion yuan level'.windInformation data shows that this year's repurchase amount exceeded10Companies worth hundreds of millions9The total repurchase amount at home reached145Yuan, with year-on-year increases in both quantity and amount of50%and20%.
"The reason for the significant increase in the number of companies implementing share repurchases this year is due to adjustments in stock prices in the secondary market. Affected by both internal and external environmental factors,AThe overall performance of the stock market has been relatively weak. When companies are confident in their fundamentals and future development, and have sufficient cash, more enterprises are willing to send a positive signal to the market by repurchasing shares for equity incentives, thereby stabilizing stock prices. 'Frost & Sullivan's Greater China Partner and Managing Director Lu Jing told the Securities Daily reporter.
Another notable feature of this year's stock repurchase market is the rapid rise of companies in strategic emerging industries. According towindInformation data shows that since the beginning of this year, there have been a total of93Home, compared with the same period last year11Home, with year-on-year growth reaching745%Looking at industries, the new generation of information technology39home), biology17Home), high-end equipment manufacturing industry15The number of industrial companies in the home region ranks among the top; looking at sectors, as mentioned above93The company is mainly focused on the Sci-tech Innovation Board (63Home) and Beijing Stock Exchange (18Home), with the combined proportion87%.
Correspondingly, the number of companies on the Sci-tech Innovation Board and Beijing Stock Exchange implementing share repurchases has increased rapidly. Relevant data shows that the above878In the company,63The company is a STAR Market company, with year-on-year growth.688%; Last year11After the Beijing Stock Exchange opened on that month, there were also within-year transactions18A company listed on the Beijing Stock Exchange has put in real money to repurchase shares.
Lu Jing analyzed that according to the new regulatory rules issued by the Shanghai Stock Exchange this year, listed companies are allowed to use excess funds raised through public offerings to repurchase shares, which has broadened the sources of funds for corporate share repurchases and has been favored by more companies on the Sci-Tech Innovation Board and strategic emerging industries.
"The Sci-tech Innovation Board and the Beijing Stock Exchange represent more strategic emerging industries. Currently, sci-tech innovation companies are in a stage of rapid development, and having a stable management team and outstanding talents is crucial for the long-term and stable development of the enterprise. Therefore, most companies choose to retain talent through methods such as share buybacks for equity incentives." Wang Weijia, General Manager of Beijing Sunshine Tianhong Asset Management Company, told the Securities Daily reporter.
Zhou Yunan, founder of Beijing Nanshan Investment, told reporters that repurchasing shares for the implementation of an equity incentive plan is conducive to improving the company's corporate governance structure, establishing and improving a long-term incentive and restraint mechanism, attracting and retaining outstanding talents, fully mobilizing the work enthusiasm of the core team, enhancing the company's core competitiveness, and increasing the overall value of the company.
Mainboard companies remain the main force in repurchases
Meanwhile, this year's repurchase market has continued the two main characteristics of previous years: Main board companies still serve as the main force, and the repurchasing companies are still highly concentrated in the three industries of pharmaceutical biology, electronics, and computers.
windInformation data shows that since the beginning of this year, looking at different sectors586Amount of repurchase by the motherboard company552yuan, with the respective proportions of quantity and scale being67%and81%They occupy an absolute leading position; from an industry perspective, companies implementing share repurchases are mainly concentrated in the pharmaceutical and biotechnology sectors (108Home), Electronics98home), computer89Three major industries in (home), totaling295Home, accounting for the total34%.
Lu Jing analyzed that listed companies usually consider two of the most important factors when deciding whether to initiate share repurchases: one is the performance of the company's stock price in the secondary market, and the other is whether the company has sufficient cash flow. Relatively lower stock price performance drives outstanding main board enterprises to initiate repurchases, thereby sending a signal to investors that they are confident about the company's future development.
Lu Jing further stated that from the perspective of cash flow, main board enterprises are usually larger in scale and volume. Excellent companies are not affected by depressed stock prices and have sufficient cash flow to provide a basic condition for share repurchases. Therefore, main board enterprises remain the main force behind share repurchases.
Wang Weijia stated that in the past year, there has been a significant decline in the pharmaceutical biotechnology, electronics, and computer sectors, with most companies' stock prices at low levels. At the same time, many sub-sectors within these industries possess high technical barriers and typically use equity incentives to maintain the stability of their core teams.
*This article is reprinted from "Securities Daily", reporter Xing Meng , Original title: within the year878homeAThe joint-stock company has invested678100 million yuan share repurchase Strategic emerging industry companies have a strong willingness to repurchase ">
Frost & Sullivan Insight & Extended Readings
Q: What are the main purposes for listed companies to actively repurchase shares?
A: Common reasons why listed companies actively repurchase shares include:1It conveys a signal to the market that current stock prices are undervalued, and to investors that the company has confidence in its future development, thereby stabilizing stock prices;2) Improve the efficiency of capital use. When a company has sufficient cash and believes that current stock prices are undervalued by the market, it will repurchase outstanding shares through cash to increase earnings per share and return on net assets;3) Implementing equity incentives allows the repurchased shares to serve as a source of shares for the equity incentive plan, granting shares to employees without affecting the rights and interests of the original shareholders;4To prevent hostile takeovers, repurchasing shares can reduce the number of shares that hostile acquirers can buy from the secondary market, thereby lowering the risk of a company being acquired maliciously. In addition to the above reasons, repurchasing shares can also serve other purposes, such as adjusting the company's financial leverage.
QWhy has the number of companies on the Sci-tech Innovation Board and strategic emerging industries that have initiated repurchases this year surged?
A: The sharp increase in the number of companies on the Sci-tech Innovation Board and strategic emerging industries that have initiated repurchases can be attributed to two main reasons. On the one hand, there is also the stock price performance of the company mentioned earlier in the secondary market. With innovation and technology50Take the index as an example, up to this year7End of the month, technology innovation50The index has risen from the opening day at the beginning of this year1110.92How did it fall so much1088.91how,7The decline for the month exceeded20%In addition,2022The year marks the third anniversary of the opening of the Sci-Tech Innovation Board. With the arrival of the third anniversary, many listed companies have also witnessed a new wave of lifting restrictions on share sales. Around and after this peak, stock prices can fall significantly due to shareholder reductions and negative impacts from internal and external macroeconomic environments. Therefore, in order to boost market confidence, many enterprises choose to repurchase shares.
On the other hand, at the beginning of this year, the 'Self-regulatory Guidelines for Listed Companies on the Shanghai Stock Exchange No.7The approval for enterprises to use over-raised funds for share repurchase in 'Share Repurchase' has also become one of the important factors. In principle, the funds raised by a company should be used for its main business. For companies listed on the Sci-tech Innovation Board (STAR Market), the relevant raised funds should comply with national industrial policy regulations and be used for innovation in the technology field. However, with the promulgation of new policies allowing the use of over-raised funds for share repurchase, this new model has become more favored by STAR Market companies and strategic emerging industry companies. It helps to boost investor confidence while not significantly increasing the cost of share repurchase for these companies.
