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Seven Benefits of the Preference Shares on the Capital Market

Post:2013-10-10    Views:3938    Copy link   

First, according to the international market standards, the preference shares can limit the rights of the controlling shareholder, transfer the remaining shares into preference shares, solve the "dominance" issue effectively and accelerate the construction of the modern enterprise system.

Second, by damaging the huge interests of the controlling shareholder, it can dispel the blind impulse on listing of considerable companies and relieve the expansion pressure.

Third, the controlling shareholder has a large number of preference shares which can only get bonus. That will force major shareholders to dividend and transfer the share. As a result, the listed companies can improve the returns for the investors.

Fourth, the preference shares can only be traded in centralized trading systems rather than in the secondary market, which can eliminate the fear of long-standing demand for low cost of share, enhance the stability of the price and attract people to long-term investment.

Fifth, the preference shares can’t be included in the controlling shareholder's stake. The slightest mistake will lead to the dispute like Huang Guangyu VS Chen Xiao. It’s also conducive to market asset restructuring and can enhance the quality of listed companies.

Sixth, the preference shares also include the non-public issuance of listed companies, namely the private placement just like refinancing. Once the refinancing has become preference shares, it is impossible to refinance for the non-high-growth companies. If the preference shares can be refinanced, they must be good stocks and will be sought after by large organizations, such as the Buffett investment which not only optimizes the market allocation of resources but also resolves the market for refinancing disgust.

Seventh, the implementation of the preference shares eases the contradiction between supply and demand in the market and attracts the currency in real estate, gold, banking and other financial products to the stock market which becomes an important carrier of the "Chinese dream".

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