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Equity incentives: Why is Gree scolded and Xiaomi praised?

Posted by: Yoyokuo 2022-11-21 Comments Off on Equity incentives: Why is Gree scolded and Xiaomi praised?

Following the “one billion yuan gambling game”, Xiaomi (01810.HK) and Gree Electric (000651.SZ) once again entered the public eye due to the same incident. Recently, the two companies announced equity incentive plans. First, 12,000 employees of Gree are expected to buy stocks at “half price”, and then Xiaomi generously distributed equity incentives, and nearly 4,000 employees received “big red envelopes”.

Judging from the market evaluation, Xiaomi’s equity incentives have gained a lot of praise and envy. Some netizens left a message, “Is there still a shortage of employees in the Rebs family? I will work hard when I go to Xiaomi.” However, Gree Electric has encountered controversial comments. Miss Dong’s highest floating profit is expected to exceed 800 million yuan, making some investors unable to sit still.

It is also an equity incentive, why is Gree scolded and Xiaomi praised? In this competition, Lei Jun won Dong Mingzhu?

Equity incentives: Why is Gree scolded and Xiaomi praised?

Different people get incentives

On July 2, Xiaomi Group announced that the board of directors granted a total of more than 70 million shares to 3,904 employees according to the share award plan. Based on the recent closing price of Xiaomi, this share award is worth more than 1.8 billion Hong Kong dollars.

Who can get these valuable stocks? Lei Jun immediately followed up and released a Weibo introduction, saying that behind this equity incentive plan is the “Young Engineer Incentive Plan” that he is personally responsible for. This time from the mobile phone, Internet and other departments, mainly For front-line engineers, product managers, designers, etc., the youngest candidate is only 24 years old.

Finally, Lei Jun did not forget to advertise: Welcome excellent engineers to join Xiaomi. “Grassroots” can also counterattack and receive “big red envelopes”, and they are also encouraged by the Boss’s name, attracting many passers-by to praise “Xiaomi is the legendary company of others”. This operation of Lei Jun not only united the core team, but also a wave of positive public relations with good effect.

Prior to Gree’s equity incentive on the evening of June 20, it was planned to sell the company’s stock to 8 directors, supervisors and senior executives and nearly 12,000 employees at a price of about half of the current Gree stock price of 27.68 yuan per share. These stocks are exactly the same. The company had previously repurchased 108 million shares.

Dong Mingzhu is the most conspicuous among them. According to the plan announced by the company, if the performance target is achieved, Ms. Dong can invest up to 830 million yuan to subscribe for 30 million shares of which, the ratio is as high as nearly 30%. According to the rough calculation, if the current stock price is used, Dong Mingzhu will earn up to 800 million yuan at that time.

According to “Securities Market Weekly”, the plan is “strong in nature”, with low assessment standards and limited incentives.

It can be said that the reputation of Gree’s equity incentives this time was lost to Dong Mingzhu’s “too conspicuous” in it. But does Dong Mingzhu really get too much? In fact, Gree’s equity incentives are far less than Xiaomi’s.

Equity incentives: Why is Gree scolded and Xiaomi praised?

Equity Award:

Millet is commonplace, but Gree is not enough

On the other hand, Xiaomi’s equity awards can be described as “common”, but Gree rarely does this, which is one of the reasons for the divergence of attitudes towards equity awards among investors of the two companies.

According to Securities Times statistics, Xiaomi has issued a total of 11 equity awards since its listing, including 4, 5, and 2 in 2019, 2020, and 2021. In addition, it is more common for a rookie Internet company like Xiaomi to “bind” the core team with equity rewards, and it can indeed retain talents, and investors are also more accepting of this move.

Importantly, as early as the beginning of the listing, Xiaomi had formulated a comprehensive equity award plan, which was once regarded as a “textbook-style” equity award case. According to the prospectus disclosed by Xiaomi in May 2018, the types of company equity awards are mainly divided into three types: stock option, restricted stock unit RSU, and restricted stock RS.

Equity incentives: Why is Gree scolded and Xiaomi praised?

In contrast, Gree, an established manufacturing company, has not implemented any form of equity incentive plan in the past ten years. At the same time, the salaries of company executives such as Dong Mingzhu are not high from the financial statements. Compared with Midea’s 2020 director and supervisor’s high compensation of nearly 77 million yuan, Gree’s is only 21.71 million yuan.

Without good remuneration, how can we retain the core team and develop core technologies? Gree may indeed need to stimulate employees’ morale through remuneration and benefits, but unfortunately it was not understood by the market for a while.

Equity incentives: Why is Gree scolded and Xiaomi praised?

Back to the true chapter of eternity: company performance

Regardless of whether it is “50% off to sell shares” or “to give away tickets”, all forms of equity incentives need to return to the real chapter in the eyes of investors: through real money and silver, the team will be united, and whether there will be a real improvement in performance is forever. the true chapter.

Xiaomi’s performance in the first quarter broke out and embarked on the fast lane of growth. In the quarter, revenue reached 76.9 billion yuan, a year-on-year increase of 54.7%, and net profit increased by 163.8% to 6.1 billion yuan. Both revenue and profit hit a record high in a single quarter.

In addition, Xiaomi was removed from the US restricted list at that time, and the supply of chips was safe, which made investors more confident.

On the other hand, Gree faces more severe performance challenges. Gree’s performance in 2020 and the first quarter of 2021 is not satisfactory because the online channel is not as good as that of its competitor Midea. Although the first quarter of 2021 recorded good growth from a low base, it still did not return to the level of the same period in 2019. Perhaps it is also the reason for the poor performance, and the equity award at this time has even more questioned by the market.

But in the final analysis, equity awards are measures and attempts to enhance the cohesion of the company and retain talents. Greeda doesn’t need to be discouraged by the temporary evaluation (with Miss Dong’s strong personality, she will not care about these evaluations), on the other hand, Xiaomi’s reputation for winning equity awards does not mean that the company’s development will continue to be smooth.

The operation of the enterprise is a long-distance race, and the two star players Gree and Xiaomi still have a long way to go.

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