Erie's $16bn market value evaporates: Controversial half-price equity incentive case angered by investors

There is a big drop in white horse stocks! This time it is also a consumer bull stock with a market capitalisation of more than $170 billionOn August 6th, Yili shares opened sharply lower in early trading, closing in the middleFrom the trading situation on the same day, more than 3 million yuan of sales orders frequently appear, the market institutions sell strong willBy the day's close, Yili shares were down 8.8 percent at 28.10 yuan, wiping more than 16 billion yuan off their market valuemarket analysts believe that Yili shares in the market huge plunge, on the one hand, and today's stock market as a whole fell, on the other hand, but also has a lot to do with the equity incentive programon the evening of August 5th, Yili shares threw out a draft $6 billion equity incentive planAfter the announcement of the plan, there was a wave of market controversyfrom the content, at an average price of 31.67 yuan to buy back the shares, the transfer of hands at about half the price of the management of equity incentives."investment managers believe that this seemingly incentivising company management program, the real award price is unreasonable, unlock conditions are too difficult, to the detriment of small and medium-sized shareholdersYili shares announcement, said that the equity incentive to achieve the interests of shareholders, the company and core team in line, to promote the company's sustained and healthy developmentconsumer white horse approaching the collapsethe former consumer white Mayi shares today ushered in a huge sharp decline in the situation, the intraday share price was close to a haltMore investors issued a soul question, "Clearly is the dairy price sourcing, Yili instead to stop?" "a unforeseen plunge, what's going on?"August 6th, Yili shares in the early session of the collection of auction trading, then opened, the share price fell rapidly, and there was a "flash crash" situation, the share price at one point close to a halt, down as much as 9.7%and from the time-sharing situation, more than 3 million yuan of selling orders abound, and the volume of sales is large, institutions sell strong willfrom the day's capital flow, august 6, the day of the main capital net outflow of up to 517 million yuan, of which the total amount of the main outflow reached about 3 billion yuan, the large single sale of orders as high as 382 million yuan, large single sales amounted to 136 million yuanAt the same time, today's total mainstream inflows amounted to $2.5 billion, with huge turnoverin the eyes of many market participants, Yili shares today's sharp fall in volume is likely to be related to a nearly $6 billion incentive package announced last nightOn the evening of August 5,, Yili Aghast released the 2019 Restricted Stock Incentive Plan (Draft), in which Yili Shares proposed to grant a total of about 182.92 million restricted shares to the incentive target, accounting for 3.00% of the Company's total share capitalit is understood that the incentive target includes listed companies in the company's current directors, senior management, core technology (business) backbone, such as a total of 474 peopleAmong them, The chairman and president of Yili shares Pan Gang received the largest number of shares, a total of 60.8 million shares, accounting for 33% of the total number of restricted shares awarded, accounting for 0.9972% of the current total share capitalAccording to the regulations, this grant ratio is even close to the number of "individual objects to obtain equity incentives not more than 1% of the total share ceiling" the number of topand according to the above-mentioned equity incentive announcement, the incentive plan is awarded at a price of 15.46 yuan per share, which is 50% of the average share price of the shares in the first trading day of the plan (August 5)the restricted stock granted is the company's share buybackfrom the secondary marketAccording to the announcement, as of July 24, 2019, Yili shares have repurchased about 182.92 million shares of the company through the Shanghai Stock Exchange trading system through centralized bidding, with an average transaction price of 31.67 yuan per share, at a cost of about 5.8 billion yuanthat is to say, the repurchase price is 31.67 yuan, while the award price is cut in half, only 15.46 yuanAs of the night of August 5, The closing price of Yili's shares was 30.81 yuanIn accordance with the convention, the company with its own funds to buy back and then awarded to management after the cost difference of up to 2,972 million yuan, will be included in the management costs as the cost of the implementation of this incentive programin accordance with the incentive plan, the performance appraisal of equity incentives is based on 2018 net profit, 2019-2023 net profit growth rate of 8%, 18%, 28%, 38%, 48%, while setting the 2019-2023 return on net assets of 15%the controversialof the equity incentive plan, but the draft equity incentive plan was soon issued, quickly attracted strong controversy from investors and investors in the market the announcement of Yili shares, the incentive plan aims to further improve the company's compensation system through the assessment of equity incentive objects, establish and improve the company's long-term, effective incentive and restraint mechanism, balance the company's short-term goals and long-term goals, fully mobilize the company's directors, senior managers, core technology (business) backbone and the company believes that should be inspired to have a direct impact on the company's business performance and future development of other employees initiative, enthusiasm and creativity, enhance the company's cohesion, the company's core interests institutional investment manager simply pointed out that the equity incentive plan for Yili shares is "very detrimental to small and medium-sized shareholders" In his view, the seemingly generous incentive plan actually has three problems: , which pays up to $2.2 billion in shares, an average of $400 million a year, which is equivalent to about 7% of the company's profits in 2018 Compared with this high cost volume, the share price is too low unreasonable II, from the incentive equity release conditions, five consecutive years of compound growth rate requires 8%, but from the past Yili shares performance growth situation, to achieve the conditions of equity unlock is very difficult, not worthy of this incentive level three, the chairman of the chairman's personal incentive shares accounted for one-third, and in the case of the company to pay high salaries, at a low price to obtain 2 billion yuan worth of shares, it is not reasonable "If the equity incentive is passed, there will be only two categories of people left in the capital market, listed executives and non-listed executives, " said the investment manager, As long as the company's performance growth is slightly higher than inflation, it can get a substantial incentive " note that investors are also controversial about the incentive stake in Erie on investment social forums and stock bars Many investors are also concerned about the difficulty of incentive equity release, the exercise of the right to target is too low Yili's $16 billion market value is gone: Controversial half-price equity incentive case Investors angry Yili 16 billion market value is gone: controversial half-price equity incentive case investors are angry but there are investors admitted that this Yili shares, although there is a certain link to the incentive program, but may also be the White Horse stock itself "valuation kill" related " today's sharp fall in Yili shares, the focus may also be the overall market environment is too poor, the consumer industry, many leading stocks are in the downward adjustment stage At present, the fundamentals of Yili shares are not a problem, after the sharp fall in white horse shares, there may still be an opportunity to buy or fill positions "An institutional investor in southern China said for the rationality of the performance appraisal indicators of the equity incentive program, Yili shares in the announcement of the explanation is that the performance indicators at the company level of the incentive plan selected the "return on net assets" and "net profit growth rate" two indicators, these indicators help to directly reflect the profitability and growth capacity of listed companies, such as the above-mentioned indicators set reasonable and scientific in The View of Yili shares, the performance objectives are clear and challenging for the incentive target, and for the company, the setting of performance indicators can promote the incentive object to work hard and improve the company's performance performance Target setting will not only help the company to enhance its competitiveness, but also help to increase the company's attractiveness to talent in the industry, and play a positive role in promoting the construction of the company's core team indicators suggest that growth is not strong enough? it's worth noting that the six-year equity incentive plan, in addition to its low exercise target, also seems to see a possible decline in the consumer industry's leading company's future performance growth according to the announcement, Yili shares of this restricted stock award of the limited sale of lifting, a total of 5 steps, every 12 months to liberalize the 20% limit sales ratio In addition to the detailed regulations and constraints on executives and employees, the company also set performance appraisal targets in the performance appraisal index, Yili shares set the first release of the period requirements are "2019 net profit growth rate is not less than 8%, the return on net assets is not less than 15%." and in terms of the profitability of Yili's shares in the past, the company's net profit growth rate from 2016 to 2018 reached 12.66 percent, 17.69 percent and 10.32 percent, respectively, both well above the target of 8 percent In 2014, Yili's net profit grew by 71% after the deduction After deducting, the return on net assets was 19.61%, 21.23% and 21.06%, respectively and compared with the earnings targets provided by equity incentives, the 8% net profit growth rate after the points deduction and the 15-year ROE level all appear to be less than the growth of previous years institutional investors have questioned, "Has the yili proposal hinted at a high performance downgrade?" " institutional attitudes are divided Yili shares have been a popular stock among many investment institutions, and with the announcement of incentives and a sharp fall in share prices, it may also hurt institutional investors chasing white horse stocks , a total of 103 funds held 848 million shares of Yili, or 13.91 percent of the total share capital, an increase of 92.02 million shares from the end of the first quarter In addition, 82 brokerages held a total of 50.4 million shares, or 0.82% of the total share capital however, there are brokers who stand up for the incentive package China Merchants Securities food and beverage industry analysts said that the company's incentive program landing, expand the incentive object, binding the core backbone, through excellent mechanisms to continuously strengthen their core competitiveness, the five-year dimension strive to 50% of the non-performance growth space Therefore, the company was given 28 times PE in 2020 to maintain a target price of $35 and a "highly recommended-A" rating the outcome of the controversial equity incentive package may need to be submitted to the general meeting of shareholders before it can be revealed on Yili Yili Group to become the world's first dairy industry, the first in Asia, but also China's largest and most complete product category of dairy enterprises At the same time, Yili is the only dairy company in China that meets Olympic standards and serves the 2008 Beijing Olympic Games, and the only dairy company in China that meets the Expo standards and serves the 2010 Shanghai World Expo Source: Financial