The impact of stock repurchase: the repurchase of shares by listed companies will reduce the number of shares in circulation, and the reduction of the number means the reduction of the total share capital. At this time, earnings per share will increase, which will directly stabilize the stock price.
On the one hand, the listed company proposes to buy back its shares, and the controlling shareholder proposes to increase its tradable shares. On the one hand, it reflects the affirmation of the management and major shareholders on the intrinsic value of the company, and the increase and repurchase are conducive to transmitting the signal of the intrinsic value of the company to the market.
On the other hand, holdings and buybacks are also important components of the internal stability mechanism of the market, which objectively play a role in stabilizing the market and restoring investor confidence.
Stock repurchase refers to the behavior of a listed company to buy back a certain number of shares issued by the company from the stock market in cash. After the stock repurchase is completed, the company may cancel the repurchased shares. However, in most cases, the company reserves the repurchased shares as "treasury shares", which no longer belong to the issued shares and does not participate in the calculation and distribution of earnings per share. Treasury shares can be used for other purposes in the future, such as issuing convertible bonds and employee welfare plans. Or sell them when you need money.
On October 9, 2065438+08165438/KLOC-0, the CSRC, the Ministry of Finance and the State-owned Assets Supervision and Administration Commission jointly issued the Opinions on Supporting Listed Companies to Buy Back Shares, which will take effect as of the date of promulgation. The Opinions broaden the sources of repurchase funds, appropriately simplify the implementation procedures, guide the improvement of governance arrangements, encourage various listed companies to implement equity incentives or employee stock ownership plans, strengthen incentives and constraints, promote the company to consolidate its valuation foundation, enhance its risk management capabilities, and improve the quality of listed companies. [ 1]
2018165438+1From October 23rd, the Detailed Rules for the Implementation of Share Repurchase of Listed Companies in Shanghai Stock Exchange (Draft for Comment) was publicly solicited for comments [2].
Repurchase significance:
1. Significance to shareholders
Shareholders are required to pay capital gains tax after share repurchase and dividend tax after cash dividend. In the case that the former is lower than the latter, shareholders will get tax incentives. On the other hand, if all kinds of factors are likely to change due to stock repurchase, it is difficult to predict whether the result is beneficial to shareholders. In other words, stock repurchase has an uncertain impact on the interests of shareholders.
2. Meaning to the company
The ultimate goal of stock repurchase is to increase the value of the company:
(1) One of the purposes of the company's share repurchase is to send a signal to the market that the share price is undervalued. The effect of stock repurchase is opposite to that of stock issuance. Stock issuance is considered as a signal that the company's stock is overvalued. If the company's management thinks that the company's share price is undervalued, it will send a positive message to the market through stock repurchase. The market reaction of stock repurchase is usually to raise the stock price, which is conducive to stabilizing the company's stock price. If the stock is still undervalued after the repurchase, the remaining shareholders can also profit from the low-price repurchase.
(2) When the company's disposable cash flow obviously exceeds the cash flow required for investment projects, it can use free cash flow for stock repurchase, which will help improve the profitability per share. Stock repurchase reduces the company's free cash flow and reduces the agency cost of management. The management tried to convince investors that the company's shares were attractive through stock repurchase, and the company did not waste shareholders' money on investments with poor returns.
(3) Avoid the negative impact of dividend fluctuation. When the company's remaining cash is temporary or unstable, and it is uncertain whether it can maintain a high dividend policy for a long time, it can pay dividends through stock repurchase on the basis of maintaining a relatively stable dividend rate.
(4) Give full play to financial leverage. If the company thinks that the proportion of equity capital in the capital structure is high, it can increase the debt ratio through stock repurchase and change the company's capital structure, which will help reduce the weighted average cost of capital. Although paying cash dividends can also reduce shareholders' equity and increase financial leverage, their earnings per share are different under the same income. In particular, by issuing bonds to buy back the company's shares, the debt ratio can be quickly increased.
(5) Through stock repurchase, the number of external tradable shares can be reduced, the stock price can be raised, and the risk of the company being acquired can be reduced to some extent.
(6) Adjust the ownership structure. The repurchased shares (treasury shares) owned by the company can be used to exchange the shares of the acquired or merged company, and can also be used to meet the needs of warrant holders to subscribe for shares of the company or convertible bondholders to convert common shares of the company, and can also be used for the execution of stock options of management and employees to avoid diluting the income by issuing new shares.