China’s electric appliance giant Gree is planning to cancel the company’s employee stock ownership plan, leading its total equity to shrink from 6.016 billion units to 5.914 billion units.
In the past six months, Gree has seen fluctuations in its stock price, peaking at 69.79 yuan in December last year. However, to date, its market value has shed more than 100 billion yuan. To moderate the impact of such a decline, Gree has launched three successive repurchase programs.
The company bought back 108 million shares with 6 billion yuan on February 24th, which was the first round of its repurchase program. The second round of share buybacks was on May 18th, wherein the company spent 6 billion yuan on its own shares. The third round of repurchase is currently underway, and is estimated to cost less than 15 billion yuan. Gree originally had planned to distribute these shares to its employees.
After several rounds of stock repurchase agreements, Gree announced its first employee stock ownership plan (draft) on June 20th. The total capital involved will not exceed 3 billion yuan, and the number of employees participating in this plan will be less than 12,000.
Employees only have to pay a price of 27.68 yuan per share, which is half of the average share price Gree has spent during the repurchase period. Dong Mingzhu, chairman and president of Gree, will invest 830 million yuan to buy 30 million shares, taking up 27.68% of the total capital of the plan.
The plan has given rise to some controversy. Gree’s share price in the secondary market has also fallen below 50 yuan per share, hitting a new low in recent trading.
Stock repurchases are often usedto stabilize or even increase the price of a listed company. Gree’s cancellation of the plan is, in a way, to reassure public doubts.
Gree noted that this plan focused on encouraging employees to stay with the company through thick and thin, rather than pursuing short-term profit. The plan will be only available for 2 years. In fact, employees can hold the shares until they retire.