BEIJING, June 29 -- Baoshan Iron & Steel Corp, the nation's leading steel maker, increased the amount of compensation it would give to shareholders in an updated proposal yesterday.
Public shareholders will receive 2.2 shares for every 10 they held, up from the previous offer of one share, the Shanghai-based company said in a statement.
They'll also receive one warrant giving them the right to buy 1 share at 4.5 yuan (54 US cents) for every 10 shares held after 378 days.
"The improved compensation plan is ok," said Dai Bo, chief research officer with CITIC Fund Management Co. "And warrants will help to solve some problems that cannot be addressed by bonus shares."
Most investors are unfamiliar with warrants, which were launched when China established its stock market 13 years ago, but were suspended in 1996 due to their misuse by speculators.
In mid-June, the Shanghai and Shenzhen stock exchanges announced they were once again considering launching warrants, offering investors financial tools with which to tackle dramatic hedge price fluctuations.
Taking compensation in the form of warrants into account, Baosteel will in fact pay some 2.5 shares to its public shareholders for every 10 they held, a reasonable figure according to a number of fund management companies.
"From the perspective of supply and demand, this is a fair compensation plan," Sun Wei, a manager with Guotai Jun'an Allianz Fund Management Co, told China Daily. "But three bonus shares will be more appropriate for public shareholders as their cost is hovering around 5.5 yuan (66 US cents)."
To boost investor confidence and reduce price volatility, Baosteel's parent promised to earmark 2 billion yuan (US$241 million) to buy Baosteel's listed stock if its price dips below 4.53 yuan apiece two months after shareholders' approval of the plan.
The company will put the new compensation plan to shareholders at a meeting on August 12.
Baosteel's yuan-denominated A shares, which are open to select foreign investors, have been suspended from trade since mid-June while the company worked out the share reform.
They last closed at 4.89 yuan on June 17.
Baosteel is among 42 companies in the second round of a pilot program aimed at selling non-tradable shares, pushing reform intended to enhance transparency and boosting corporate profitability in a market mired at eight-year lows.