Analysis Of The Motivation And Effect Of Kangtai Biological "Bottom-Covering" Increasing-Holding

The stock market has heated up since mid-2014,with the A-share index reaching record highs,culminating in mid-June of 2015 as the bubble continued to grow.In the midst of the huge oscillation,the Securities Regulatory Commission(SFC)issued a notice on July 8 to stabilize the market and to maintain the stability of stock prices.Among them,the SFC proposed a "five options" plan,in which listed companies can take into account their own reality and develop specific plans to maintain the stability of the company’s share price,including but not limited to major shareholders’ shareholdings,company buybacks,employee stock ownership plans,and equity incentives.Many listed companies stabilize their share prices by increasing their shareholdings,and at the same time,initiate their employees to participate in the company’s actions and increase their shareholdings together.In order to encourage employees to enthusiastically participate in the increase in holdings,the actual controller of the listed company initiated a "underwriting" increase in holdings,that is,employees in a certain period of time to increase the company’s stock,to meet the restrictions,if there is a loss,by the caller’s own compensation.The "underwritten" shareholding is created in this context.(hereinafter referred to as Kangtai Biological Products)as a case study,and analyze the motives and effects of the underwritten shareholding increase issued by Kangtai Biological Products in September 2021.The study found that: firstly,the employees’ response was relatively high after the release of the underwritten shareholding increase by Kangtai Biologicals,which raised short-term funds for the company,and the one-year lock-up had ended and was now in the underwritten compensation stage;the shareholding increase plan showed two characteristics,firstly,a high proportion of equity pledges;secondly,a long lock-up period for the short increase.Second,after the implementation of the underwritten shareholding plan,this part summarizes the motivation of the actual controller’s initiative to initiate underwritten shareholding increase mainly includes motivating employees,relieving the pressure of fund-raising,maintaining stable share prices and helping shareholders to reduce their holdings to cash four points,which is inseparable from the market performance after the shareholding increase.Third,the impact of the underwritten shareholding increase on the stock market is calculated and analyzed by the event study method,which finds that this initiative makes the share price rise significantly in the short term and can effectively achieve employee motivation,but the effect is not sustainable;the long-term effect of the underwritten shareholding increase by major shareholders is evaluated by using financial indicators and enterprise value added(EVA)analysis,which confirms the unsatisfactory development of the company’s operation level and the accelerated decline of core indicators and did not play a role in supporting the share price of the underwritten shareholding increase.Fourth,the above analysis summarizes the following problems,i.frequent shareholding cuts by major shareholders,which weaken market confidence;ii.incomplete and unfocused information disclosure;iii.insufficient profitability,insufficient innovation drive,slow turnover of accounts receivable and shortage of funds,etc.In response,in order to obtain long-term performance,it is necessary to improve the company’s operation and performance;reasonably use the underwriting behavior and improve the underwriting plan;and strengthen the underwriting information disclosure so that investors can understand the progress of corporate underwriting in a timely manner.