Last night, a historic scene in the domestic video website industry appeared. The market value of the two-dimensional video community B station exceeded iQiyi for the first time.
At 23:13 last night Beijing time, Bilibili rose 2.45%, with a market value of US$11.761 billion, exceeding the market value of iQiyi 11.672 billion.
In the first quarter of this year, Bilibili's revenue was less than one-third of iQiyi , but it relied on a large number of young users and high user stickiness to achieve a "counterattack" of the stock price.
At the end of the U.S. stock market in the early morning of this morning, the market value of iQiyi was US$11.538 billion, while the stock price of B station fluctuated downward, and the market value fell to US$11.444 billion at the close. Although the market value of B station fell back to iQiyi , the market value of the two is very close.
1. The concept and institutional value of share repurchase
share repurchase has two meanings, one is broad and the other is narrow. Broadly repurchases include not only the repurchases of shares of limited liability companies, but also the repurchases of shares of joint-stock companies. Repurchase in a narrow sense generally refers to the share repurchase of a joint-stock company, especially the share repurchase of listed companies. The amendment to the Company Law involves share repurchases of joint-stock companies. Therefore, this article discusses the legal act of joint-stock companies to repurchase their issued shares.
From the theory and practice of share repurchase in the relatively mature securities market abroad, generally speaking, a company repurchases its own stocks mainly have the following purposes and institutional value:
(1) Adjust the total capital in a timely manner and optimize the company's asset structure. On the one hand, company share repurchase can realize the company's function of adjusting the total amount of company capital. The company's total capital should be continuously adjusted with its different strategic stages and macro conditions. When the total capital needs to be reduced, repurchasing shares and cancelling them is a more suitable way to reduce capital. On the other hand, repurchasing one's own stock can also optimize the company's financing method, because the company's debt-to-asset ratio should be maintained at a certain level, otherwise the company will not be able to fully enjoy the benefits of liabilities. The company can increase the debt-to-asset ratio and optimize the company's asset structure by repurchasing shares.
(2) transmits positive signals and stabilizes stock prices. Stock prices are determined by the intrinsic value of the stock and capital market factors. When the stock market enters a downturn, the company can repurchase its own shares, which not only reduces the amount of shares circulating in the market, stimulates the market demand of the company's shares, and provides impetus for the company's stock price to rise. More importantly, when the company announces that it will repurchase shares at a high price, it will send a positive signal to investors, that is, managers believe that the company's common stock is undervalued by the market, and enhances investor confidence.
(3) curb hostile acquisitions and maintain control of the company. First, when the company's stock price is undervalued, the company often becomes the target of the merger, and repurchasing the company's shares can increase the stock price and increase the acquisition cost of the acquirer, thereby curbing hostile acquisitions. Secondly, through repurchasing external shareholders, the proportion of shares that the company's major shareholder or management can control will be increased and the control will be further strengthened. Again, companies are also vulnerable to buyers when they have large cash reserves. When a company uses a large amount of cash to share buybacks, it can reduce the company's financial attractiveness and reduce the interest of acquirers, which is a "scorched earth tactic" in anti-acquisition technology.
(4) Share business results and realize an incentive mechanism. A common problem in reality is that the actions of company employees and managers may violate the obligation of loyalty. To solve this problem, the internal constraints of the corporate governance structure and external constraints such as the capital market, product market and labor market are far from enough. Therefore, it is necessary to share business results with it so that the efforts of employees and managers can be related to the increase in company wealth. Employee stock ownership plans and equity incentives are institutional innovations that adapt to this need. However, one of the problems with implementing such incentive mechanisms is the source of shares. If new shares are issued, on the one hand, the procedures will be complicated, the procedures will be complicated, and the costs will be high; on the other hand, the new shares will increase the total number of shares in the market and reduce the single share income.The share repurchase mechanism can effectively avoid these problems and better solve the problem of the source of shares.
(5) Repurchase the company's shares and protect a few objection shareholders. Modern companies implement capital majority decisions. Therefore, the interests of minority shareholders will inevitably be ignored and even be harmed by absolute or relatively controlling shareholders. Giving minority shareholders the right to claim share repurchase is one of the institutional designs to protect the interests of minority shareholders. Through the right to claim share repurchase, minority shareholders can safely withdraw.
(6) replaces dividend distribution and increases shareholder income. This is because dividend distribution requires investors to pay taxes, and share repurchases allow investors to save taxes and increase returns while gaining the value of shares. At the same time, compared with direct dividend distribution, share repurchase can reduce the number of shares issued and the calculated base of net income per share, thereby maintaining or increasing the earnings per share level. Therefore, share repurchase has the function of distributing dividends and increasing shareholder income.
2. Changes in the share repurchase system of my country's Company Law
China's share repurchase system first appeared in the "Company Law" in 1993. It then went through two revisions in 2005 and 2018, showing a trend of steady progress and gradual relaxation, which is becoming more and more in line with the requirements of the market economy.
In the Company Law of 1993, the restrictions on share repurchase are quite strict. In only two cases, a company can acquire its own shares. One is to cancel its shares to reduce the company's capital; the other is to merge with other companies holding its own shares. Moreover, my country does not allow the repurchased shares to be treasured, and the registration must be cancelled within ten days after the acquisition. As for the quantity, method, source of funds, etc. of repurchases, the Company Law does not clearly stipulate [1].
The amendment to the Company Law in 2005 has made major changes and supplements to the share repurchase system, which is mainly reflected in: First, two situations of repurchase are added, one is to "reward shares to employees of the company", and the other is to "shareholders object to the company's merger and division resolutions made by the shareholders' meeting and request the company to acquire their shares." Second, the procedural requirements for repurchases have been added. For the repurchase of the company's shares due to three situations: "reducing registered capital", "merging with other companies holding shares of the company" and "rewarding shares to employees of the company", it is clearly stipulated that "it should be resolved by the shareholders' meeting." Third, the handling methods of repurchasing shares under several circumstances have been supplemented or modified. First, for shares repurchased due to "merger with companies holding shares of the company", it is required to "deregister or transfer within six months" instead of "deregistering within ten days"; second, for shares repurchased for "rewarding shares to employees of the company", it is required to "transfer to employees within one year". Again, for the shares repurchased in the case of "shareholders objecting to the company's merger or division resolutions made by the shareholders' meeting and requiring the company to acquire its shares", they require "transfer or cancellation within six months." Finally, the only thing that has not changed is that for shares repurchased due to "reducing the company's registered capital", it is still required to be cancelled within ten days from the date of acquisition; Fourth, for the repurchase of shares in order to "reward shares to employees of the company", the requirements for the repurchase ratio and source of funds have been added, and the repurchased shares shall not exceed 5% of the total issued shares of the company, and the funds used for the acquisition shall be paid from the company's after-tax profits [2].
