On April 27, the Saturday Co.Ltd(002291) announcement, known as the first share of women’s shoes, said that the chairman and actual controller of the company suggested employees to buy their own shares, and promised that if employees bought from April 28 to May 6, they would hold them continuously for more than 12 months and remain on the job. In case of losses, they would bear them, and if they generated profits, they would all belong to the employees.
This kind of “bottom-up” shareholding increase plan has a long history. Whenever the market fluctuates sharply and the stock price falls sharply in the short term, the major shareholders of the company will mobilize employees to buy shares from the secondary market. Employees can “protect principal and income” and the major shareholders can “lose capital and earn money”, which can be regarded as a disguised employee welfare. However, after years of practice, the bottom holding increase can not stabilize the stock price most of the time. On the contrary, there are many risks such as large shareholders using their holdings to cash out, causing short-term sharp fluctuations in the stock price and failing to fulfill the bottom holding commitment. Therefore, it is widely questioned and criticized by investors.
The author believes that there are several problems worth discussing.
The first is the buying logic. For most investors, the amount of funds and the timeliness of news are congenital weaknesses. Therefore, the most important thing to invest in the secondary market is to refer to the fundamentals of listed companies. The same is true for employees who plan to increase their holdings, because investing in their own stocks is also an investment behavior, which needs to follow the basic logic of investment.
Graham, the mentor of Warren Buffett, believes that stocks have their intrinsic value, and the stock price always fluctuates around the intrinsic value. In other words, if a listed company has no problems in fundamentals, the decline caused by the short-term decline of share price will be repaired in the future. However, for companies with unstable performance and lack of growth space, even if the current stock price has reached a record low, it does not rule out the possibility that the stock price will continue to decline in the future. After all, the three word commitment of major shareholders can not control the future trend of stock price.
The author notes that the performance of Saturday Co.Ltd(002291) in recent years is like a roller coaster. The loss in 2017 was about 350 million yuan, the profit in 2019 was about 150 million yuan, and the loss in 2021 was about 700 million yuan; The net profit increased by 3200% year-on-year in the previous year and fell by 3000% year-on-year in the next year. For such a stock, even if there are major shareholders, how can employees be assured to invest?
Another is the buying opportunity. Most companies have clear regulations on the buying time, mostly within one week after the announcement. For example, the employee shareholding increase plan stipulated in Saturday Co.Ltd(002291) this time also caught up with the May Day holiday, with a total trading time of only 4 days, and the trading needs to be considered on the next day of the announcement. Employees have the feeling of being driven to the shelves. If they want to buy, they can only trade in a hurry.
In addition, although the “pushing votes” of major shareholders to employees in person does not violate any laws and regulations, coupled with the bottom-up commitment, it is inevitable to mislead other investors, that is, the price during the increase plan seems to be acquiesced to be the cost price of major shareholders, causing speculation in the secondary market. For example, after Leyard Optoelectronic Co.Ltd(300296) launched the bottom-up share increase plan for the second time in October 2018, the share price rose by about 20% within 8 trading days specified in the share increase plan. However, in the following year, the company’s share price was in shock and downward for most of the time, and the employees and investors involved in the increase were basically unprofitable.
Similarly, judging from the recent trend of a shares, the possibility of short-term reversal is low, and the share price of Saturday Co.Ltd(002291) has fallen by more than 40% since September last year. If it continues to decline, resulting in the “lose lose” situation of employees and major shareholders, it is also necessary to ask whether major shareholders will honor their commitments as scheduled. After all, there are many precedents of breach of this initiative.
For example, in 2017, delisting Jinyu (formerly known as Dongfang Jinyu) once threw out a bottom-up employee shareholding increase plan, and the chairman of the company disclosed the shareholding reduction plan three months after the launch of the bottom-up plan, which led to public criticism. Finally, the company withdrew from the market, leaving a chicken feather.
Third, the bottom holding increase belongs to the agreement reached between the company’s major shareholders and employees, which has nothing to do with the outside of the company, and even has no legal relationship with listed companies. Moreover, historically, the number of people participating in such share increase plans is rare, and the market value participating in the share increase is a drop in the bucket, which is difficult to become a force to stabilize the stock price. If it is made public, it is more or less a bit of a drunkard than a wine.
To sum up, the author believes that investors or employees need to be cautious about the bottom-up increase. If a listed company wants to maintain its share price, it can do so by means of company repurchase, self increase of major shareholders, equity incentive and other means. Whether in terms of strength, actual effect and convenient supervision, the results are far greater than employees’ self purchase. After all, the bottom of the market, who can make it clear?
