WIND statistics show that, based on announcement dates, since 2017 a total of 581 listed companies in the A-share market have seen changes in the holdings of key shareholders (major shareholders, directors, supervisors and senior executives, and shareholders holding more than 5%). Among them, 325 companies showed an overall net reduction direction, with net reductions totaling 32.033 billion yuan. In terms of reduction scale, 71 companies had a net reduction reference market value of more than 100 million yuan. Century Cruises, Shandong Iron & Steel, and Tongli Cement ranked in the top three with net reduction amounts of 3.803 billion yuan, 1.800 billion yuan, and 1.450 billion yuan, respectively.

Looking at the details of the reductions, large-scale reductions by listed company shareholders, and even “clear-out” reductions, are becoming increasingly intense. Shandong Iron & Steel announced on the evening of February 24 that the Tianhong Ping An Yangtze River No. 1 asset management plan managed by Tianhong Fund had sold a total of 421 million shares of the company through block trades on February 23, a reduction ratio of 4.99% of the company's total share capital, at an average reduction price of 2.73 yuan per share. After the reduction, the aforementioned asset management plan no longer held any shares of the company.

Theoretically, lawful and compliant reduction of holdings is a basic right of listed company shareholders. However, various signs show that many reduction cases in the recent period are often accompanied by the release of high dividend and share conversion plans by listed companies. On February 17, Lin Jing, one of the controlling shareholders and actual controllers of Jiaxun Feihong, proposed a high dividend and share conversion plan, intending to distribute a cash dividend of 1 yuan (including tax) for every 10 shares to all shareholders, and to increase capital reserve by converting 10 shares for every 10 shares to all shareholders. At that time, Jiaxun Feihong claimed that it had not received notice from the controlling shareholders, actual controllers, shareholders holding more than 5%, directors, supervisors, or senior executives of any planned reductions within the next six months. On February 20, however, the company issued a supplementary announcement stating that Zheng Guixiang, one of the company's controlling shareholders, actual controllers, directors, and general manager, planned to reduce no more than 8 million shares (2.78%); and Wang Yi, one of the company's controlling shareholders, actual controllers, directors, deputy general manager, and board secretary, planned to reduce no more than 6 million shares (2.09%).

WIND statistics show that 140 listed companies in the Shanghai and Shenzhen stock markets have currently announced their 2016 dividend and share conversion plans. Among them, 78 companies have conversion ratios of 10-for-10 or higher, and 20 of these companies simultaneously announced reduction plans by important shareholders. Preliminary statistics show that several companies, including Estun, Zhiguang Electric, Leo Group, Hailide, and Julong Pipe Industry, have received inquiry letters or attention letters from exchanges due to their 2016 high dividend and share conversion plans. The inquiries and attention focus mainly on whether the high dividend and share conversion plans match the company's growth and whether they are coordinated with major shareholder reductions.

Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, believes that some listed companies launch ultra-high-ratio share conversion plans to stimulate retail investors to enter the market and take over the shares. Such ultra-high-ratio conversions are traps and bait, with strong deceptive and tempting qualities. Initially, the practice of large-ratio capital reserve conversion was mainly suitable for the expansion needs of high-growth small-cap companies; later it gradually became institutional lobbying or coercion of listed companies to make large-ratio conversions so that market makers could sell off at high positions and exit; today's large-ratio conversions have become an important tool to rescue institutions trapped at high positions and buyers in private placements, and such large-ratio conversions are still escalating without a bottom line.