Listed mainland companies who have bought back shares to bolster prices must wait six months before reselling, according to new guidelines as authorities continue to seek ways to shore up market confidence.
Under the new rules, published late last week by China’s two main stock exchanges, publicly traded firms will also be able to raise funds from bond issuance or bank loans to fund their buyback plans, Caixin reports.
The move builds on a recent push to facilitate greater share buybacks by Chinese companies, many of which have had a rotten time in the country’s bear market. Any company that has lost 30% of its share price within 20 consecutive trading days, or whose share price has dipped below its book value per share, is now eligible to buy back shares, under early November guidelines.
For investors, however, a lockup period as short as six months opens the possibility for companies to use buybacks as a means of manipulating their stock price with much greater flexibility. Instead of buying back to restore investor confidence, employee shareholders could take short positions as prices swing, according to analysts.