According to whether divestiture belongs to the subjective will of the company, it can be divided into voluntary divestiture and involuntary divestiture. Among them, voluntary divestiture refers to the divestiture that management actively finds that divestiture can improve the competitiveness of the company; Involuntary divestiture is a forced divestiture under the constraints of relevant government laws and regulations. For example, the expansion of the company through mergers and acquisitions may lead to monopoly, in order to avoid the prosecution of the government's anti-monopoly law and withdraw funds. There are several ways to divest the company's assets:
Selling assets to controlling shareholders or parent companies
This kind of divestiture is the most common in domestic listed companies. Its advantages are that the transaction is concluded, the price and payment method are flexible, and the assets sold do not pose a competitive threat to themselves. It is also the most commonly used means to adjust assets within the holding group of listed companies. If the high-quality assets are stripped out, it will obviously be bad for the existing company's share price. It is good news if we divest non-performing assets and revitalize funds.
Selling assets to unrelated parties
This way refers to the sale of part of the company's assets to other companies outside the company's control. This kind of transaction is often beneficial to both companies, so it is relatively easy to reach. By divesting loss-making business, non-main business and idle assets, we can obtain certain operating cash flow, which can be used to improve the company's financial situation, which is obviously good for the company's stock.
Management buyout
Management buyout refers to the sale of a part of a company to a manager or a group of managers, also known as leveraged buyout. The manager first invests in the establishment of a new company, and then borrows money from a bank or finance company with the acquired assets as the guarantee to purchase the assets split from the original company. Finally, the manager repays the loan by selling part of the assets and production and operation income of the new company. This method is generally used for listing high-quality assets independently in the future. It is not good for the existing company's stock.
Employee stock ownership plan
The employee stock ownership plan here refers to the plan that the company transfers some assets to its internal employees, establishes a new company, and realizes asset divestiture. Specifically, first, a shell company is established, and then the shell company sets up an employee stock ownership plan (ESOP). Then the shell company borrows money from financial institutions by using ESOP, buys the assets divested by the parent company, and is responsible for the operation. Finally, shell companies put their operating income into the employee stock ownership plan to repay loans. With the reduction of debt, all shares will eventually be held by internal employees. Employee stock ownership plan was originally a welfare pension plan, and later it was widely used in reorganization activities such as acquisition and takeover. The impact of this divestiture on stocks is relatively neutral.
The above are several different ways of divestiture and the possible impact on the company's stock. I hope it will help you.