This year, the amount of cash withdrawn by auto parts companies has reached four times that of整车 companies.

Since mid-April, the A-share market has been on a continuous downward trend, falling below the 3,100-point mark. Recently, listed companies have begun collectively staging “share-reduction shows.” According to data, from January 1 to May 24, 2017, a total of 29 A-share listed automotive companies saw their major shareholders reduce their holdings by 32.06 million shares, with the total value of these reductions reaching 670 million yuan based on current market capitalization.

The reporter noted that listed companies in the auto parts sector have become a “hard-hit area” for share reductions. Many major shareholders have taken advantage of the annual report disclosure period—when positive news about stock splits and bonus shares is often highlighted—to reduce their holdings. Data show that 21 auto parts companies saw their major shareholders sell off a total of 15.04 million shares, with the aggregate value of these sales reaching 450 million yuan—four times the total amount of share reductions by listed automakers as a whole.

Among the aforementioned share reductions, four listed companies—Pangda Group, Yunyi Electric, Mengshi Technology, and Aotejia—experienced “liquidation-style” reductions by their major shareholders. Ten listed companies saw major shareholders reducing their holdings by amounts reaching 10 million yuan; among these, four companies had major shareholders reducing their holdings by more than 100 million yuan, and six companies saw major shareholders selling over 1 million shares.

Shareholders are frequently engaging in liquidation-style reductions of their holdings.

According to statistical data compiled by reporters, from January 1 to May 24, 2017, five listed automakers experienced share reductions by their actual controllers, totaling 15.04 million shares. The total value of these reductions, based on market capitalization, amounted to 110 million yuan.

Among them, Jianghuai Automobile saw the largest reduction in holdings. On March 10, 2017, JianTou Investment, a general shareholder holding more than 5% of Jianghuai Automobile’s shares, reduced its holdings of the company’s shares by a total of 82.5 million shares through centralized bidding. The reference market value of this single reduction alone reached 105 million yuan, accounting for approximately 0.44% of the company’s total share capital.

Unlike Jianghuai Automobile, all the share reductions by shareholders of GAC Group, which ranks second, were carried out by senior executives. According to the announcement, between May 4 and May 8, 2017, four senior executives—including Feng Xingya and Wu Song—cumulatively reduced their holdings of the company’s shares by 200,000 shares, with the value of the shares sold based on market prices amounting to approximately 5.24 million yuan.

It is worth noting that among the listed companies experiencing share reductions by major shareholders, some have even seen “liquidation-style” reductions by their controlling shareholders—where the majority of the shares sold originated from those held by asset management plans controlled by the company’s actual controller.

Taking the publicly listed automotive services company Pangda Group as an example, the company announced that from June 17, 2016, to July 5, 2016, the Great Wall Asset Management Plan—controlled by Pang Qinghua, the company’s controlling shareholder and actual controller—increased its shareholding in the company by 107 million shares, representing 1.60% of the total share capital. As the Great Wall Asset Management Plan was set to expire, it reduced its holdings by 107 million shares on May 17 and no longer holds any shares in the company. Following this reduction, Pang Qinghua now collectively controls 35.1% of the voting rights at the company’s shareholders’ meetings.

It’s worth noting that the reasons behind share reductions by shareholders of listed companies vary. Some reduce their holdings to improve their own capital utilization and provide working capital for the company; others, taking into account the company’s strategic deployment, opt for gradual reductions. As for many other listed companies, the reasons for share reductions are straightforward and clear, and their intention to cash out is quite evident.

Parts companies become a major hotspot for share reductions.

Data shows that since the beginning of this year, a total of 21 listed auto parts companies have seen their major shareholders reduce their holdings by 15.04 million shares. The total value of these reductions, based on market capitalization, amounts to 450 million yuan—four times the total reduction amount by major shareholders of whole-vehicle manufacturers.

In fact, among the listed automotive companies that have seen significant shareholders completely liquidating their holdings, in addition to the cases where the actual controllers of the aforementioned companies reduced their stakes due to the expiration of asset management plans, there are also instances where employee stock ownership plans held by listed company employees have reached maturity and triggered reductions in holdings.

Compared to the bustling market activity at the time of their launch, employee stock ownership plans always see a low-key exit. Interestingly, when these plans reach the end of their lock-up periods and employees begin selling their shares, more than half still rely on time-tested tactics such as “high stock dividends and bonus shares,” and it’s not uncommon for companies to use positive news to boost short-term stock prices. Yunyi Electric and Mengshi Technology are among those that have done just this.

Data shows that from January 1 to May 24, 2017, Yunyi Electric reduced its holdings of the company’s shares by a total of 3.47 million shares, with the amount reduced based on market value reaching 173 million yuan.

On January 3 of this year, Yunyi Electric released an announcement stating that the first-phase employee stock ownership plan had been fully sold out and was now terminated. According to the company’s announcement, all 1.465 million shares held under the first-phase employee stock ownership plan have been completely sold. The reporter noted that, spurred by the positive news disclosed by Yunyi Electric on November 24 last year—announcing a share distribution of “10 shares for every 10 held, with a cash dividend of 1 yuan”—the company’s stock price has repeatedly reached new highs. Based on the average transaction price of Yunyi Electric during the reduction period, which was approximately 47.72 yuan per share, the first-phase employee stock ownership plan is estimated to have cashed in about 69.92 million yuan.

On February 11, Yunyi Electric released another announcement stating that a shareholder holding more than 5% of the company’s shares had completed the reduction of its holdings and the implementation of its reduction plan. According to the announcement, Dezhuan Trading, a shareholder holding more than 5% of Yunyi Electric’s shares, reduced its stake in the company by a total of approximately 2 million shares through auction trading on December 8, 2016, February 3, 2017, and February 10, 2017, representing a reduction ratio of 0.88%. Calculated at an average reduction price of 55.77 yuan per share, Dezhuan Trading realized total proceeds of approximately 112 million yuan from these sales.

Not surprisingly, on the evening of January 5, 2017, Mingshi Technology issued an announcement stating that the company’s 2015 employee stock ownership plan had been completed, with an average transaction price of 28.47 yuan per share.

The announcement indicates that the 2015 Employee Stock Ownership Plan of Mengshi Technology reached the end of its lock-up period on January 5, 2017. As of January 11, 2017, all 3.4588 million shares held under the company’s 2015 Employee Stock Ownership Plan (Wanjia Yinggong Jinshi No. 1) had been fully sold. The total transaction amount was RMB 98.48 million, with an average transaction price of approximately RMB 28.47 per share. The number of shares purchased accounted for 1.25% of the company’s total outstanding shares.

It’s worth noting that on that day, the company’s stock closed at 25.30 yuan per share, meaning the employee stock ownership plan has found itself in the awkward situation of suffering paper losses right after the positions were just established.

“High-stock dividends and share transfers have effectively become the golden partners for untying employee stock ownership plans,” an industry insider told our reporter. The relationship between employee stock ownership plans and market-capitalization management is subtle. How listed companies can incentivize employees while avoiding short-term speculation that ‘harvests’ retail investors has become a pressing issue that employee stock ownership plans must address in the future.