On January 4, Grand Industrial Holding Co.Ltd(000626) issued two announcements. One announcement said that the reduction plan issued by Vice Chairman and vice president Xu Qiang in November last year had been completed; Another announcement said that Xu Qiang issued a new reduction plan. It can be seen that Xu Qiang “has decided to go”.
This is just one example of the reduction of holdings implemented by the directors, supervisors and senior managers of Shanghai and Shenzhen stock markets in the past year. The data show that in the past year (i.e. from January 4, 2021 to January 4, 2022, the same below), the directors, supervisors and senior managers of 1107 listed companies in Shanghai and Shenzhen have reduced their holdings, with a total cash out of about 110.155 billion yuan. Moreover, combined with the information previously publicly reported by the regulatory authorities, it can be found that there is no lack of short-term trading, window trading, insider trading and other behaviors in these holdings reduction.
Some investors told the Securities Daily that as a “key minority”, the implementation of short-term trading, window trading and insider trading by the directors, supervisors and senior executives is a kind of harm to small and medium-sized investors who are at a disadvantage in obtaining information.
some directors and supervisors reduced their holdings
In the past year, the reduction of directors, supervisors and senior managers of some companies can be regarded as a great deal.
For example, there are 15 listed companies that have reduced their holdings and cashed out more than 1 billion yuan, of which Hangzhou Hikvision Digital Technology Co.Ltd(002415) has the highest amount of senior executives’ holdings, reaching 4.665 billion yuan, and the average price of reduction is 55.95 yuan / share. Personally, Gong Hongjia, former vice chairman and director of Hangzhou Hikvision Digital Technology Co.Ltd(002415) , has the highest reduction amount. According to the data, Gong Hongjia cashed out about RMB 2.976 billion on March 3 and March 4, 2021. The lowest reduction amount is Baida Group Co.Ltd(600865) , and the reduction amount of senior executives is only 0700 yuan. The data show that the reduction is the reduction of 100 shares by Feng Yixiao, the employee representative supervisor. However, Baida Group Co.Ltd(600865) executives increased their holdings by 98.7909 million yuan in the same period.
“The reduction of directors, supervisors and high shareholders generally belongs to investment profit.” A relevant person close to the listed company told the Securities Daily, “especially some enterprise executives may have invested funds before the company’s IPO and experienced the listing and lock-in period. As long as they meet the relevant regulations, it is reasonable to cash.”
In fact, most listed companies’ announcements on the reduction of directors, supervisors and senior executives will mention “personal capital needs”. However, we need to be vigilant that some “key minorities” are shareholders holding more than 5% of the shares of listed companies. Jiang Han, a senior researcher of Pangu think tank, told the Securities Daily: “if the reduction of these executives leads to their shareholding ratio less than 5%, then this reduction often has purpose and particularity.”
illegal reduction occurs frequently
The directors, supervisors and senior managers of many listed companies have illegally reduced their holdings, mainly short-term trading, window trading, etc.
According to the reporter of Securities Daily, in the last month alone (i.e. from December 4, 2021 to January 4, 2022, the same below), 37 announcements in the two cities mentioned that Dong Jiangao or his relatives had conducted short-term transactions.
Most of these listed companies will interpret the illegal reduction as “misoperation”. For example, Bece Legend Group Co.Ltd(000803) vice president Gan Hainan reduced 20000 shares of the company without disclosing the reduction plan in advance due to misoperation. The company said that after verification, it was due to its misoperation of the securities account. After taking the initiative to review and apologize, Gan Hainan promised to turn over 179400 yuan of income to the company; Newcapec Electronics Co.Ltd(300248) Yang wenshou, deputy general manager, reduced 10000 shares of the company without disclosing the reduction plan in advance. The company said that the violation was not subjective and intentional because his spouse misoperated his stock account, and the misoperation did not generate income.
In addition, the directors, supervisors and senior managers of listed companies reduced their holdings in the sensitive period. According to the announcement, Baoxiniao Holding Co.Ltd(002154) director, chief financial officer and deputy general manager Wu Yue has reduced his holdings of 465000 shares due to personal capital needs, which violates the management rules on the shares and changes of the company held by directors, supervisors and senior managers of listed companies and the guidelines for the standardized operation of listed companies on Shenzhen Stock Exchange (revised in 2020). The company said that after verification, it was a deviation in understanding the reduction rules, and Wu Yue immediately reported to the board of directors and apologized.
Window period is also prone to illegal reduction. For example, Surfilter Network Technology Co.Ltd(300311) announced on August 4, 2021 that Zhao Huifang, the spouse of Fu Zhaoyang, the supervisor of the company, sold 2000 shares of the company’s shares in the secondary market on August 3, 2021, with an average transaction price of 11.99 yuan / share and a transaction amount of 23980 yuan. The company has previously made an appointment to disclose the 2021 semi annual report on August 30, 2021, Zhao Huifang’s above transactions violated the guidelines for the standardized operation of companies listed on the growth enterprise market of Shenzhen Stock Exchange (revised in 2020) and the rules for the management of shares held by directors, supervisors and senior managers of listed companies and their changes in relevant rules about directors, supervisors and senior managers within 30 days before the announcement of periodic reports of listed companies The securities affairs representative and the spouse of the above-mentioned personnel shall not buy or sell the company’s shares.
“Compared with external shareholders, the company’s senior executives have more information advantages. In order to protect the right of fair trading of external shareholders, under the securities legal system, there are many additional restrictions on the reduction of senior executives’ holdings. The illegal reduction of senior executives may constitute short-term trading and window trading, or may touch the red line such as insider trading.” Lawyer Wang Zhibin of Shanghai Minglun law firm explained in an interview with the reporter of Securities Daily.
recommendation representatives should perform their duties more strictly
The reporter of Securities Daily learned in the interview that the industry generally believes that the reduction of directors, supervisors and senior managers should be treated differently. On the one hand, it is necessary to check whether the directors, supervisors and senior managers have ulterior motives and lack confidence in the development of the company, and urge the sponsor representatives to strictly perform their duties and standardize the reduction of directors, supervisors and senior managers; On the other hand, these directors, supervisors and senior managers should also be allowed to share the company’s growth dividends.
Jiang Han believes that we should look at the reduction in two ways. “Does the reduction of senior executives mean that senior executives are not optimistic about the development of the company? It is possible. However, we should also consider that most of the wealth of senior executives of many listed companies is in stocks, and the shares themselves are also a reward for hard work and investment vision. Reasonable and legal reduction should be supported.”
Pan Helin, executive director of Digital Economy Research Institute of Central South University of economics and law, said in an interview with Securities Daily: “Dong Jiangao and his family members have ‘misoperation’ in reducing their holdings, but they also deliberately do it under the cloak of ‘error’. This phenomenon needs to be accurately cracked down by strengthening supervision. We should make the rules more rigid and make violators dare not cross the minefield. At the same time, strengthening law enforcement can also well popularize the restriction measures on reducing holdings.”
“In the early stage of listing, the sponsor representative will repeatedly warn the executives what can be reduced and what can not be reduced. The occurrence of illegal reduction is actually that the sponsor representative does not perform his duties in place.” Jiang Han said.
Pan Helin said: “if the reduction of senior executives is reasonable and legal, and the impact on the market is reduced through directional transfer, investors need not panic at all. Once the illegal reduction occurs, minority shareholders will naturally ‘vote with their feet’.”
(Securities Daily)
