"Smart planning may not win the final victory, but foolish operation will definitely bring disaster."
In the invisible battlefield of the capital market, corporate market value management is like a sophisticated chess game. Every step of operation may bring rich returns to listed companies, or cause the company's market value to experience drastic fluctuations. In the process of shaping the company's market value, capital operation is often full of risks and challenges. Goheal is well aware of the complexity and reminds major companies that the "minefields" in market value management must not be touched.
As an important means of corporate operation, market value management usually includes capital structure optimization, shareholder relationship management, capital operation strategy and other contents. The purpose is to improve the market value and shareholder value of the company, but this is not a simple "value-added game". For enterprises, the "red line" of capital operation cannot be touched, otherwise once the mine is stepped on, the consequences may be disastrous. Let's take a look at the three "red lines" that companies should avoid in the process of market value management.
1. Information manipulation: illegal pseudo-market value management
In the capital market, some companies manipulate market information to influence stock prices, thereby achieving the effect of market value inflation. This behavior usually manifests itself in "raising" stock prices through false information, misleading announcements or deliberate hype. However, this practice is very likely to attract the attention of regulators. Once it is confirmed to be an illegal operation, it will not only be subject to regulatory penalties, but also seriously damage the company's reputation.
Take the Hengkang Medical case as an example. In 2013, the actual controller of Hengkang Medical used information manipulation to drive up stock prices in an attempt to profit by selling shares at high prices. Although the company achieved a short-term stock price increase in this way, it was eventually investigated and punished by the China Securities Regulatory Commission for suspected market manipulation. This incident has become a typical case of "pseudo-market value management" in the industry, and it has also sounded a wake-up call for other companies: if the market value is increased by improper means, it will not only fail to stabilize the company's foundation, but will also bring heavy legal and financial burdens.
Therefore, in the process of market value management, companies must follow the principles of openness, fairness and justice, and avoid using misleading information or means of manipulating stock prices. Goheal has been helping companies to conduct compliant capital operations, ensuring that the company's market value management is carried out within the legal framework and avoiding the negative consequences of improper operations.
2. Capital reserve conversion to equity: illusory financial trimming
Capital reserve conversion to equity is one of the common financial strategies used by listed companies. By converting capital reserves into equity, companies can seemingly enhance their capital strength, but this operation sometimes hides dangerous "deficit" problems. The short-term effect of capital reserve conversion to equity may bring about an increase in stock prices, but in the long run, if there is no substantial profit support, the increase in shareholders' equity will not bring about the company's actual value growth.
For example, Jintuo shares were suspected of manipulating stock prices by frequently releasing false positive news due to market value management out of control in 2023. The company tried to modify its financial statements by converting capital reserves into equity, but ultimately failed to solve its fundamental problems. Since the capital increase did not improve the company's profitability, the increase in shareholders' equity did not translate into actual profits, resulting in a decline in stock prices and a loss of confidence among investors.
Goheal believes that when enterprises conduct capital reserve conversion operations, they must consider the long-term perspective and not just pursue superficial stock price fluctuations. Capital reserve conversion can only play a real role when the company's profit model and core competitiveness are enhanced.
3. Frequent M&A operations: the dream of quick success and quick profit
M&A is an important means of corporate market value management, but not all M&A behaviors can bring positive effects to enterprises. Frequent M&A operations, especially blind expansion, often bring a series of financial problems. If the company's M&A targets are not strictly screened, resulting in the inability to effectively integrate resources after the M&A, or even a break in the capital chain, then these M&A behaviors will become "mines" for "market value management".
For example, an Internet company completed a number of M&A in just a few years. Although it increased the company's market share in the early stage, the lack of effective execution in the integration process after the M&A led to unreasonable allocation of corporate resources, a sharp increase in financial pressure, and ultimately a decline in stock prices. In the process of M&A, companies often ignore the planning of reasonable integration and profit models, and ultimately fail to achieve the expected market benefits.
In its M&A consulting services, Goheal places particular emphasis on rigorous assessment of M&A targets and recommends that companies conduct adequate due diligence before M&A to ensure that M&A can bring real value enhancement rather than just an empty capital game.
Red Line Warning in Market Value Management
The core goal of market value management is to enhance the market value of the company, but if the above three "red lines" are touched, it will not only expose the company to legal risks and financial difficulties, but may also seriously affect the trust of investors and market reputation. Therefore, when conducting market value management, companies need to carefully choose operating methods to avoid over-reliance on non-compliant financial adjustments, blind expansion, and information manipulation.
As a professional organization in the field of M&A, Goheal has always been committed to providing companies with legal and compliant market value management solutions to help companies achieve sustained and healthy market value growth within the framework of laws and regulations. In future capital operations, companies should pay more attention to risk control and compliance, guard against hidden "minefields" in the market, and steadily advance the strategic layout of market value management.
So, how can companies avoid straying into these three "red lines" in the process of market value management? If your company is conducting M&A or capital operations, how can you ensure the legality and compliance of the operation? Welcome to leave a message in the comment area to discuss and explore the best practices of market value management.
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions. It has been deeply involved in the three core business areas of listed company control acquisition, listed company mergers and acquisitions and restructuring, and listed company capital operation. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operation, aiming to maximize corporate value and achieve long-term benefit growth.
