Stock Surge Leads to Company Share Reductions; Experts Puzzled

2024-08-26 108 Comments

Have you bought stocks? Are you also preparing to make a fortune?

Under the booming scene of the stock market, there is a seemingly contradictory phenomenon that sends a chill down one's spine after understanding it. According to First Financial Daily, after the surge in A-shares, nearly a hundred listed companies have issued announcements for share reduction, with shareholders reducing their holdings in astonishing amounts, with some even reducing nearly a billion yuan at a time, and there are also company executives and shareholders "grouping up" to clear out their stocks.

Experts say that with the arrival of a big bull market, stocks have become sought-after assets. The market makers fear that there won't be enough stocks to go around in the market, affecting everyone's desire to get rich, so they deliberately release some, which is equivalent to distributing dividends to everyone. But is the truth behind this really the case?

There is a question that I don't know if everyone has thought about: when everyone in the stock market is making money, whose money is being made? Essentially, the stock market is a zero-sum game, and of course, considering factors such as transaction costs, it can even be said to be a negative-sum game.

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When the market is rising, new investors have to buy stocks at higher prices, and their money flows into the hands of early investors who bought stocks at lower prices. At the same time, a portion of the funds also flows into the listed companies. When a company issues shares for the first time or issues additional shares, the investors who buy the stocks are actually providing capital to the company, and the company is essentially selling shares as a kind of equity certificate to the investors.

The current surge in the stock market has plunged many people into a state of frenzy. People see others around them making money and, driven by herd mentality, they rush into the market. This fervor has, to a certain extent, driven the further rise in stock prices, forming a seemingly virtuous cycle of growth. However, historical experience tells us that this kind of frenzy is often accompanied by a high accumulation of risks.

So, is the reduction of stocks by many companies really as the experts say? The reduction of stocks by listed company shareholders is primarily a manifestation of the profit-seeking nature of capital. For them, reducing stocks is a way to convert paper wealth into actual wealth. They previously held shares and couldn't find an opportunity to cash out. Now that the stock prices have risen, they believe they have reached their expected returns or judge that the stock prices may be about to face a correction, and that's when they choose to reduce their holdings. This is a very rational economic behavior, just like a merchant would choose to sell when the price of a product reaches its peak.It is essential to understand that corporate executives and shareholders are well-versed in the company's operational status. Their decision to reduce holdings may signal concerns about the company's future operations. Perhaps the company's current profitability appears robust due to short-term factors such as cyclical industry prosperity or one-time policy dividends. Executives, foreseeing the imminent disappearance of these favorable conditions, anticipate a potential decline in company performance and a subsequent drop in stock prices. Consequently, anyone with a modicum of sense would opt to sell off their shares in advance.

The so-called experts' interpretation that "a grand bull market is coming, and stocks have become scarce commodities. To prevent a shortage in the market that would hinder everyone's dreams of wealth and prosperity, the market makers have deliberately distributed dividends" is not merely foolish; it is downright malicious! What good intentions can these experts possibly have? Can their words be trusted?

Large-scale share reductions by shareholders indicate that beneath the surface of market prosperity, insiders may have already detected risks. They are capitalizing on the market's exuberant sentiment to cash out their shares at high values. This is a perilous signal for ordinary investors. Often swayed by market optimism, they blindly follow trends and buy stocks, neglecting the information contained in these insider share reductions. If you don't understand, watch more of my videos; they can help you avoid many pitfalls.

In an environment where the stock market suddenly surges, it is extremely challenging for ordinary people to remain rational and calm, yet it is crucial to do so. One should not blindly enter the market just because others around them are making money. It is imperative to have a clear understanding of one's investment capabilities and risk tolerance, and to engage in thorough investment knowledge learning. Otherwise, if you are not the "leeks" (a term used to describe inexperienced investors who are easily exploited), then who is?

Never be deceived by short-term stock price fluctuations, and exercise extra caution with companies that experience frequent share reductions by their shareholders. If even the company insiders do not have confidence in the company's future development, on what basis can ordinary investors expect to make a profit?

In summary, the phenomenon of share reductions by listed company shareholders amidst a stock market boom is a complex economic occurrence. It conceals the shareholders' profit motives, expectations for company operations, and risk warnings for ordinary investors. Ordinary people must not be swayed by the market's fervor. In this seemingly opportunity-filled bull market, we need to analyze and respond with rational thinking rather than being blinded by short-term gains.

Historical stock market bubble incidents, such as the 2000 internet bubble and the 2008 subprime mortgage crisis that triggered a stock market crash, both exhibited similar market frenzy and quiet exits by insiders before the bubbles burst. These historical lessons remind us to approach investments with even greater caution in the current stock market environment. Especially for newcomers preparing to enter the stock market, it is crucial to fully recognize the risks involved.

In conclusion, the phenomenon of share reductions during a stock market boom is an issue that warrants in-depth research and contemplation. It concerns the immediate interests of every investor and the healthy and stable development of the entire stock market. We must analyze this phenomenon from multiple aspects and perspectives. Never be beguiled by temporary prosperity, and do not allow so-called experts to lead you astray, becoming the "leeks" in the process.

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