A-Share Surge Followed by Mass Sell-off Announcements

Amidst the continuous surge in the stock market,shareholders of several listed companies have announced plans to reduce their holdings.

On the evening of October 7th,the electronic component distributor,China Electronics Port (001287.SZ),disclosed a reduction announcement.The National Integrated Circuit Fund plans to reduce its holdings by no more than 1.9531 million shares through centralized bidding transactions,accounting for 0.257% of the company's total share capital.Shareholder Guofeng Venture Capital Fund plans to reduce its holdings by no more than 1.3021 million shares through a combination of centralized bidding transactions and block trades,accounting for 0.1713% of the company's total share capital.Shareholders China Electronics Kunrun Fund and China Electronics Development Fund plan to reduce their holdings by no more than 1.8313 million shares through centralized bidding transactions,accounting for 0.241% of the company's total share capital.

In addition to China Electronics Port,several other listed companies such as China Merchants Highway (001965.SZ) and North New Building Materials (000786.SZ) disclosed their reduction plans in the evening.

Prior to this,there has been a noticeable increase in reduction announcements by listed company shareholders.From September 23rd to September 30th,87 A-share companies disclosed the recent reduction results or future reduction plans of their shareholders,which is twice the number of the previous week (September 15th to September 22nd).

Since September 24th,more than 100 companies have disclosed the progress of reductions or reduction plans.In addition to the surge in the number of reduction plans,the pace of shareholders' reductions seems to be "accelerating" as well.Some company shareholders have reduced nearly a billion yuan in a single instance,and some company executives have "grouped" to reduce their holdings,selling all their stocks.

Several companies have disclosed reduction plans.

Under the favorable policy,A-shares have continued to rise since September 24th,with the Shanghai Composite Index soaring by 20% in the last five trading days.On September 30th,the transaction volume of the Shanghai and Shenzhen stock markets exceeded 2.59 trillion,setting a new historical record.

With the sharp rise in stock prices,some listed company shareholders have chosen to reduce their holdings and leave.According to the First Financial Daily reporter's review of public information,since September 24th,more than a hundred listed companies have disclosed the results of shareholder reductions or future reduction plans,which is a significant increase compared to before.

Some company shareholders have chosen to reduce their holdings in one go,with amounts often reaching hundreds of millions of yuan.For example,Dongpeng Beverages (605499.SH) announced on September 26th that shareholder Tianjin Junzheng Venture Capital Partnership (Limited Partnership) (hereinafter referred to as "Junzheng Investment") had reduced its holdings by a total of 4.36 million shares of the company from July 25,2024,to September 24,2024,through block trades and centralized bidding methods.This accounts for 1.0911% of the company's total share capital,with an average reduction price of 221.74 yuan,and the cashed out amount is approximately 968 million yuan.

It is worth noting that in terms of reduction methods,in addition to common methods such as centralized bidding,many shareholders have recently reduced their holdings through agreement transfers,with the transferees often being private securities investment funds.On September 28th,Huafu Fashion announced that its controlling shareholder,Huafu Holdings,intends to transfer approximately 100 million shares to Xingjian Qinglong Private Equity Securities Investment Fund through a private agreement.The transfer price is 3.42 yuan per share,which calculates to a total cash-out of 343 million yuan for the controlling shareholder.On the same day,Yijia He also announced that its controlling shareholder and actual controller,Zhu Fuyun,in order to meet his own debt repayment needs,signed a "Share Transfer Agreement" with Zhejiang Junhong Asset Management Co.,Ltd.on September 26th,transferring 12.183 million shares held,at a price of 13.806 yuan per share,which calculates to a cash-out of 168 million yuan for Zhu Fuyun.

An industry analyst stated that this method of private agreement transfer has been relatively popular recently and has a relatively small impact on the market.At the same time,listed company shareholders can negotiate specific terms and transaction plans with private equity funds,which is more efficient.

What are the characteristics of companies that have been reduced in holdings?

Against the backdrop of a recent rapid increase in stock prices,some shareholders have missed out on subsequent gains due to share reduction.The most typical case is Cheng Lei,a shareholder of East Money.On September 19th,East Money announced that the company's senior executive,Cheng Lei,reduced his holdings by 1.2 million shares through competitive trading on the same day,with an average transaction price of 10.8 yuan per share,amounting to a reduction of 12.96 million yuan.

However,within 6 trading days after Cheng Lei's reduction,the A-share market began to rise continuously,and the stock price of East Money continued to rise.As of September 30th,East Money closed at 20.30 yuan per share,a significant increase of 89% compared to the closing price of 10.76 yuan per share on September 19th.This also means that after Cheng Lei's reduction,he indirectly "missed out on" a profit of more than 11.448 million yuan in just 7 trading days.

Among the listed companies that have recently announced share reductions,some companies with larger share reduction幅度 by shareholders in the near term have poor operating fundamentals,and their stock prices have experienced significant declines in the early stage.

For example,Yonghui Supermarket,which was recently reduced by major shareholders,according to financial reports,the revenue of Yonghui Supermarket in 2021 to 2023 was 91.062 billion yuan,90.091 billion yuan,and 78.642 billion yuan,respectively,a year-on-year decrease of 2.29%,1.07%,and 12.71%; the net profit attributable to the parent company was -3.944 billion yuan,-2.763 billion yuan,and -1.329 billion yuan.Yonghui Supermarket has also experienced a "Waterloo" in stock prices in recent three years,reaching a stage high of 10.95 yuan per share in May 2020 and then continuing to decline,hovering below 3 yuan per share in the past year.

On the other hand,some shareholders who chose to reduce their holdings were previously "trapped" due to the continuous decline in stock prices,and the warming of the stock market provided an opportunity to "untrap".Taking Teng Yuan Cobalt Industry as an example,according to the announcement,the shareholder holding more than 5%,Ganfeng Lithium Industry,plans to reduce the company's shares by no more than 2.689963 million shares through centralized competitive trading within 3 months.According to the prospectus,when Teng Yuan Cobalt Industry was strategically allocated in 2022,Ganfeng Lithium Industry was allocated 1.1496 million shares,with an allocation amount of about 200 million yuan.The IPO issue price was 173.98 yuan per share.However,Teng Yuan Cobalt Industry has been declining all the way,and the stock price was only 34.25 yuan per share on September 23rd before the sharp rise.Even though it rose to 52.61 yuan per share for more than a week before the festival,it has not fully recovered.

Some industry insiders analyze that in the past,some individual stocks have performed poorly in the market,and shareholder assets have been "locked".As the bull market rumors gradually rise,some shareholders also hope to take the opportunity of the high market sentiment to untrap.In addition,some shareholders are worried that the subsequent reduction policy will gradually tighten,and they tend to cash out as soon as possible.