Ping An staff eager to cash in on 38.32b yuan

09:24, February 25, 2010      

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China's second largest insurer will unlock 859 million shares starting March 1, making millionaires or even billionaires out of some of the company's employees.

Ping An announced Tuesday on the Shanghai Stock Exchange (SSE) that the shares, which total about 11.7 percent of the company's total shares, would be unlocked starting March 1. They are currently held by three Shenzhen-based equities management firms.

The company's prospectus in 2007 said 18,969 employees including president and CEO Ma Mingzhe, managers and even salesmen are the shareholders of the three companies.

"Not only the management team but also the general staff could buy shares at 1.76 yuan ($0.26) at that time," said Tao Zheng'Ao, an insurance sector analyst with Donghai Securities, a former employee of Ping An from 1998 to 2000.

Based on the share price of 44.61 yuan ($6.53) the company's stocks closed at on the SSE Wednesday, the 859 million shares are worth 38.32 billion yuan ($5.61 billion), or 2 million yuan ($292,825.8) on average for each staff member who invested with the equity management firms.

The 859 million shares will be sold via the bulk trading platform of the SSE in the next five years, with no more than 30 percent of the shares sold each year, Ping An said in the statement.

The good news for the staff, however, was a heavy blow to the company's public shareholders. Ping An's shares on the SSE plunged 9 percent in two days after the statement was issued, while its shares on the Hong Kong Stock Exchange also dropped 3 percent.

"What the market feared is the determination of Ping An's management team and staff to cash in," said Xu Liping, an insurance sector analyst with China Galaxy Securities.

Ping An's case is a special one as it is the only one among China's top three insurers to have issued internal shares to its staff when the practice was generally not allowed in November 1998, said Tao of Donghai Securities.

A new rule effective January 1 stipulates a 20 percent tax rate for shareholders to transfer or sell non-tradable shares after a lock-up period.

"It (the unlocking of the shares) might be the result the staff pushed for, as they are afraid of further rules placing their interest at a disadvantage," Tao said. He added that many of his former co-workers are not satisfied as their lucrative earnings are subject to a 25 percent corporate income tax when selling via the equity management firms and a further 20 percent personal income tax for transfer and sales of the released shares.

After the total unlocking of the last batch of the 859 million shares, Ping An will have 4.79 billion shares circulating on the Shanghai A-share market and 2.56 billion H shares in Hong Kong.

Source: Global Times
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