"Those who use it well will not waste it, and those who manage it well will not waste it." In the capital market, funds are like flowing water. How to guide it to flow in the right direction determines the long-term value of a company. There are many ways for listed companies to raise funds, and "convertible bonds + share repurchase" is gradually becoming the "golden partner" of capital operation, which can not only raise funds, but also stabilize stock prices and optimize the company's capital structure.
Goheal has been deeply involved in the global M&A market and found that this model is not only attractive in theory, but also successfully used by many companies in practice. So, does this strategy work? Let's start with a few classic cases to see how this "double-edged sword" of capital operation dances in the market.
Convertible bonds + share repurchase: the "martial arts secrets" of the capital market?
Convertible bonds, as a combination of bonds and stocks, can provide financing for companies on the one hand, and investors can convert bonds into company shares at a suitable stock price on the other hand to enhance investment returns. Share repurchase is a company repurchasing its own shares through the market to reduce the number of shares outstanding in the market, increase earnings per share, and convey confidence to the market. When these two are combined, it seems to be a capital operation trick that can both "attract money" and "stabilize prices".
The logic of this combination punch is that listed companies first obtain financing by issuing convertible bonds, and then repurchase shares when the stock price is relatively low to reduce the number of shares outstanding. When the company's stock price rises in the future, the convertible bond holders choose to convert their shares, and the company can reduce debt pressure and achieve a win-win situation. In theory, this operation can alleviate liquidity problems, boost market confidence, and optimize capital structure. But are there really companies in the market that have successfully broken through by relying on this strategy?
Tengbang International: The first experimenter of the "golden partner"
In the A-share market, Tengbang International is the first company to try the "convertible bond + share repurchase" model. In 2018, Tengbang International raised funds by issuing 840 million yuan of convertible bonds, and planned to use 590 million yuan of them for share repurchases, directly feeding back the funds raised by convertible bonds to the stock price. This strategy attracted widespread attention in the market at the time because it solved the liquidity pressure faced by the company and released positive signals to the market.
The operating logic of Tengbang International is very clear:
1. Issue bonds first to solve short-term funding problems;
2. Repurchase shares to reduce the market's circulating shares and stabilize the stock price;
3. Finally wait for conversion, optimize the company's capital structure and reduce the debt ratio.
The direct effect of this model is to enhance investor confidence, because the market sees that the company is willing to invest "real money" in its own stocks, indicating that the management is confident in the company's future development. At the same time, reducing the circulating shares changes the supply and demand relationship, and the stock price has the impetus to rise. However, the challenge of this strategy lies in how to grasp the market rhythm. If the repurchase time is too early or too late, it may affect the final return.
Heilan Home: "Precise coordination" of convertible bonds and repurchases
If Tengbang International is the first practitioner of the "convertible bond + repurchase" model, then Heilan Home has gone a step further in this model. The company not only issued convertible bonds, but also simultaneously launched a 5-year share repurchase plan, and the repurchase period and the convertible bond conversion period are highly overlapped.
The advantages of this strategy are:
1. When the stock price is undervalued, large-scale share repurchases are made to reduce the market's outstanding shares and increase shareholder returns;
2. When the stock price rebounds, convertible bond holders can choose to convert the shares, and the company's debt pressure will naturally decrease;
3. Through dual operations, the flexibility of capital operation is improved, leaving enough room for the company's future financing.
When studying this case, Goheal found that Heilan Home did not blindly execute the repurchase, but accurately calculated the market sentiment and operated when the stock price was undervalued. This maximizes the efficiency of the repurchase funds and improves the market's recognition of the company's value. For investors, they can choose to hold convertible bonds and wait for conversion to make a profit, or they can see that the company has increased its stock price through repurchases and increased its confidence. This "two-pronged" strategy makes the company's performance in the capital market more stable.
Is the golden partnership really "effective"? The market test is the key
In theory, "convertible bonds + share repurchases" is indeed a smart way of capital operation, but its success or failure still depends on the market environment, company fundamentals and execution strategy. Goheal has summarized the following experiences from global M&A and capital operation cases:
First, timing is the key. If a repurchase is carried out during a market downturn, the company's capital pressure may be further increased, while if a repurchase is carried out at a market high, the repurchase cost will increase significantly. Enterprises must accurately grasp market sentiment and formulate scientific repurchase plans.
Second, the company's fundamentals determine the effect. If the company's own operating conditions are not good, even if the "convertible bond + repurchase" strategy is launched, it will be difficult to change the market's long-term expectations for the company. Investors will think that this is just an "emergency" measure rather than a real value enhancement.
Finally, investor confidence is the ultimate determining factor. Convertible bonds and repurchases are essentially tools of the capital market, but market confidence is the core driving force behind stock prices. If the company can send a clear growth signal to the market through this strategy, investor confidence will drive the stock price upward, making this strategy truly effective.
Conclusion: What do you think of the "golden partner" of the capital market?
The combination strategy of convertible bonds and share repurchases undoubtedly provides listed companies with a new capital operation idea. From the innovative attempts of Tengbang International to the precise cooperation of Heilan Home, the feasibility of this model has been partially verified. However, the market is ever-changing, and not all companies can master this "golden partnership".
So, do you think the "convertible bond + share repurchase" model is applicable to more listed companies? Which industries are more suitable for this strategy in the future? Will the capital market usher in a new wave of financing? Welcome to leave a message in the comment area to discuss new ways of capital operation!
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions, focusing on the three core business areas of acquisition of listed company control, mergers and acquisitions of listed companies and capital operations of listed companies. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
