The Insider | Insider buying by directors eases to HK$118 million for the week
Notebable buying activity took place in Chinasoft International and Colour Life Services Group, while insider sales were recorded in Shenzhen International Holdings
“Tencent has been buying back their stock pre-opening bell to prop up their stock from dropping further throughout June. Will it ... 1) Be enough to prevent a further drop throughout the day? 2) Protect itself from the tech sell off in the US? If you think about it, buybacks is a type of stock manipulation. They can sell their buybacks at anytime once people reinvest. It’s like a casino and the house always wins.”
Reader comment from July 9, 2017
Tencent Holdings, based on Hong Kong stock exchange filings, has not repurchased shares in the past three years, as its last buyback was recorded in June 2014. As for director activity, executives of Tencent have been pure sellers since 2005 with HK$24 billion (US$3.06 billion) worth of disposals. The last sales by directors of Tencent were from April to May this year worth HK$345 million. Heavy insider sales surely are not a good way to prop up a stock.
As for firms being able to sell their buybacks, shares that are repurchased are taken out of the circulation which in turn reduces the issued share capital. To get those cancelled shares back into the market, a listed firm must apply for reinstatement which is not an easy process.
The stock exchange has also implemented controls to prevent stock manipulation such as limiting buybacks in a given month to no more than 25 per cent of the previous months’ turnover. The only time the Hong Kong stock exchange allowed listed firms to buy back more than 25 per cent of the previous month’s turnover was during the Asian financial crisis in 1998 due to very low activity in the market.
A listed firm can also only buy back a maximum of 10 per cent of the issued capital within the 12-month period upon gaining approval from shareholders. Once that 10 per cent threshold is reached they must seek approval from shareholders to buy back another 10 per cent. There are also price range limits a listed company can repurchase shares in a given day to prevent stock price manipulation.