As an important means to boost market and investor confidence, A-share listed companies have set off a round of “repurchase tide” since this year. The protection of the company’s real gold and silver also reassured investors. Interestingly, recently, a number of Sci-tech Innovation Board companies have actively “tasted the fresh” and explored the use of over raised funds to repurchase the company’s shares.
On April 6, the Wuxi Delinhai Environmental Technology Co.Ltd(688069) announced that the company planned to use part of the over raised funds to carry out share repurchase. The announcement shows that the company plans to repurchase shares of more than RMB 30 million or use the funds raised by the company to encourage employees to repurchase shares of more than RMB 30 million. On the evening of March 28, Hangzhou Arcvideo Technology Co.Ltd(688039) also announced that it planned to buy back shares with an over raised capital of 25 million yuan to 50 million yuan, and use all the bought back shares for employee stock ownership plan or equity incentive.
This is the fifth company on the science and innovation board to repurchase its own shares with over raised funds recently. “Over raised repurchase + equity incentive” has become the standard configuration of these companies.
The reporter noted that on March 17, Sansure Biotech Inc(688289) released the repurchase plan, becoming the “first company to eat crabs” for the repurchase of over raised funds on the science and innovation board. According to the announcement at that time, Sansure Biotech Inc(688289) plans to use 60 million yuan to 120 million yuan of over raised funds to repurchase shares of the company. The announcement said that the capital source of the share repurchase is part of the working capital permanently supplemented by the initial over raised capital of the company in the early stage. Since then, Appotronics Corporation Limited(688007) , Genew Technologies Co.Ltd(688418) have successively issued similar repurchase plans.
According to the reporter’s combing, before that, the traditional Company repurchased shares, and the sources of funds were roughly divided into three categories: repurchases with its own funds, repurchases with funds raised from financial institutions, and bond issuance repurchases. Nowadays, the science and innovation board company uses the over raised funds to repurchase, which can be described as a new face. What is the rule basis for this behavior?
All along, the management and use of funds raised by listed companies have strict norms. In principle, the funds raised by listed companies should be used for their main business. For science and Innovation Board enterprises, the use of relevant raised funds should comply with national industrial policies and relevant laws and regulations, and should invest in the field of scientific and technological innovation. In practice, the actual net fund-raising of the company often exceeds the planned fund-raising, which becomes the over raised funds.
As for the use of this part of funds, it is stipulated in the guidelines for the supervision of listed companies No. 2 (revised in 2022) that it can be used to permanently supplement working capital and repay bank loans, but the cumulative amount within each twelve months shall not exceed 30% of the total amount of over raised funds. The reporter noted that at the beginning of January this year, in order to optimize the self-regulation rule system of listed companies and standardize the share repurchase behavior of listed companies, the Shanghai Stock Exchange revised and issued the self-regulation guidelines for listed companies of Shanghai Stock Exchange No. 7 – share repurchase, allowing the over raised funds to be used for share repurchase. This has also become the rule basis of the new model.
“For the company, this new model can not only boost investor confidence, but also reduce the company’s capital occupation and reduce external risks.” According to the analysis of a market person, compared with several traditional repurchase modes, the over raised repurchase has little impact on the company’s debt. At the operational level, it reduces the capital cost of repurchasing shares and avoids external uncertainty.
At the same time the company can further strengthen the binding with the first mock exam by buying shares and then using the mode of equity incentive. Previously, Hangzhou Arcvideo Technology Co.Ltd(688039) in an interview with the media, said that the repurchased shares are all used for employee stock ownership plan or equity incentive. By improving the cohesion of the core team and the core competitiveness of the enterprise, it will further improve the company’s profitability and other operating performance, which is conducive to the long-term, healthy and sustainable development of the company.
