How does the increase in holdings and buybacks affect listed companies ?
1. There are four functions of holding increase and repurchase. Stabilizing the stock price and enhancing confidence is the main function.
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There are four reasons for listed companies to buy back and increase their holdings: to increase earnings per share and net assets per share, and to increase shareholder value; to increase the company’s operating leverage ratio; due to personal tax avoidance, dividend tax is lower than capital gains tax ; management used share buybacks as a signal to investors that the company’s stock was undervalued. In practice, the fourth reason is the main reason for listed companies to buy back or increase their shares.
2. The effect of holding increase and repurchase on stock price is not significant in the long term, but significant in the short term.
Although holding increase and repurchase can change shareholder value from a financial point of view, it cannot change the macro background of listed companies, so it is difficult for this kind of capital operation to make the stock price obtain long-term support, so the increase in holding and buyback will not change the long-term trend of the stock price. . China’s A – share market and Taiwan’s market have great similarities in those years. Taiwan also announced relevant measures to increase holdings and repurchase in the bear market due to the need to stabilize stock prices. However, the market continued to maintain a long-term trend after a slight rebound. Change.
3. Four indicators can be used to find companies that increase their holdings and buy back.
The companies that increase their holdings in the A-share market have several notable characteristics. First, the price-earnings ratio is lower than the market average level, and secondly, the ROE level is higher than the market average level and is above 10%, and is above 15% on an annual basis. The third tradable A shares The proportion of total equity is relatively high. Fourth, the proportion of minority shareholders’ equity is relatively low, and cash flow cannot be the basis for judgment.
4. The increase in holdings may become a common phenomenon, and the repurchase may not be universally implemented. It may become a common phenomenon, but the repurchase may not be universally implemented.
The main reason may be the issue of corporate governance. A considerable number of bank stocks have foreign holdings. If repurchase measures are taken, the proportion of foreign holdings may be too high, affecting the state’s controlling rights. In addition, the proportion of small and medium-sized enterprises that increase their holdings is relatively small at present. In the future, the enterprises that increase their holdings on the small and medium-sized board may mainly focus on enterprises with a low shareholding proportion.