"Shareholder Reduction: A Tightening Noose on A-Share Market"

Recently, as the stock market has been on the rise, shareholders have become more active in reducing their holdings. According to incomplete statistics, from September 24th to October 8th, more than 150 companies have announced the reduction of their shareholders' holdings or their plans for future reductions. The number of listed companies issuing reduction announcements has noticeably increased compared to before September 24th.

The activity of shareholders reducing their holdings has cast a shadow over the stock market, which has just started to recover. After all, intensive share reduction by shareholders not only withdraws a large amount of capital from the market, but more importantly, it shakes the confidence of investors. If major shareholders, directors, supervisors, and important shareholders all reduce their holdings, how can investors be optimistic about the development of the next market trend? Therefore, share reduction by shareholders has always been a bearish factor in the market.

Regrettably, the bearish factor of share reduction has been deeply embedded in the A-share market like a tight箍咒, becoming a nightmare for the A-share market. Although the increasingly active share reduction by shareholders has attracted market attention due to the recent improvement in the stock market, in fact, even when the stock market was in a slump, share reduction by shareholders never stopped. It's just that due to the sluggish market, investors have even become accustomed to the normalized decline of the stock market, and therefore did not pay enough attention to some shareholders' reductions. After all, in a sluggish market, there are relatively fewer shareholders participating in the reduction and fewer stocks being reduced. As major shareholders of some listed companies, they even need to participate in the increase of stocks. And when the market warms up, major shareholders no longer need to increase their holdings, and major shareholders, directors, supervisors, and important shareholders can all reduce their holdings together.

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Faced with the rush of shareholders reducing their holdings, investors can't help but ask: where have all those reduction regulations gone? Why can't these reduction regulations control the reduction behavior of these listed company shareholders? However, it has to be said that this kind of questioning from investors is actually very powerless.

In fact, many reduction regulations simply cannot solve the problem of shareholders reducing their holdings. Many reduction regulations, including the new reduction regulations introduced by the management in recent years, are to regulate the reduction behavior of shareholders, not to prohibit shareholders from reducing their holdings. The reduction behavior of shareholders that is prohibited is the reduction that violates regulations. Therefore, as long as the reduction behavior of shareholders is not in violation of regulations, no reduction regulation can prohibit the reduction of shareholders. And now, the reduction of some listed company shareholders is obviously not in violation of regulations, so it is not subject to the constraints of various reduction regulations.

This is the dilemma that the current A-share market and the vast number of investors are facing. Although the management has repeatedly revised and improved the reduction regulations, as long as the reduction behavior of shareholders is in compliance, this kind of reduction behavior is not restricted. In this way, as long as the stock market improves, the reduction of shareholders will follow, leading to an endless supply of stocks in the stock market, and the bulls in the stock market will eventually be strangled. After all, all reduction regulations only manage the reduction of shareholders that violates regulations. However, the actual situation in the stock market is that even if all shareholders reduce their holdings in compliance, this is also a heavy burden for the stock market to bear.

After all, the proportion of shares held by these shareholders of listed companies is too much. For example, according to the current regulations, for companies with a total share capital of less than 400 million shares, the proportion of shares held by various shareholders can reach 75% of the total share capital, which is three times that of the first issuance of circulating shares; for companies with a total share capital of more than 400 million shares, the proportion of shares held by various shareholders can reach 90% of the total share capital, which is nine times that of the first issuance of circulating shares. And these shareholders' shares can all be listed for circulation and cashed out after one or three years from the listing period.

Such a large number of share reductions and cashing out are of course unbearable for the stock market. But this is what the current A-share market must face. In this way, the reduction of shareholders is firmly embedded in the A-share market like a tight箍咒. As long as the A-share market dares to rise, the reduction of shareholders will come face to face, so the reduction of shareholders is always the winner in the rise of the A-share market. Because of this, in every round of rising market, the final winner team must have these reducing shareholders.

How to remove this tight箍咒 on the head of the A-share market? This is of course a huge project, but a crucial point is to improve the equity structure of new listed companies. Except for enterprises that the state must control, the holding of controlling shareholders of new listed companies must be controlled within 30%, and 20% of it cannot be directly listed for circulation after listing, and can only be transferred through private agreements. At the same time, the proportion of the first issuance of shares of listed companies should not be less than 50% of the total share capital of the company. In this way, the pressure of share reduction faced by enterprises after listing will be greatly reduced.