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Vanke unexpectedly stops trading
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CHINA Vanke Co unexpectedly suspended trading yesterday afternoon, saying in a statement to the Shenzhen Stock Exchange that it’s planning to issue new shares for capital restructuring and assets acquisition.
The statement came after Vanke’s Chairman Wang Shi openly opposed the Baoneng Group’s acquisition of shares that would make them the company’s biggest shareholder. Experts have speculated that the suspension may be Vanke’s strategy to deter the investor.
Baoneng Group, a Shenzhen-based conglomerate with real estate and finance businesses, overtook state-owned China Resources to become Vanke’s largest shareholder, which deeply worried Wang.
“Our management does not welcome Baoneng as our biggest shareholder,” said Wang in an internal meeting on Thursday. “The reason is simple, it just doesn’t have enough credit.”
Wang is concerned that Vanke’s credit score will be lowered by Baoneng Group, thus adding to the property developer’s borrowing cost.
A regulatory filing showed that Jushenghua, an affiliate of Baoneng Group, borrowed twice the amount of its cash to buy a stake in Vanke.
“If the snowball keeps rolling, it will be just like what happened after the leverage buyout boom in the 1980s in the United States,” said Wang, raising doubts on the Baoneng’s aggressive bet. “The consequences are just unimaginable.”
Baoneng then said in a statement yesterday that the group has always abided by the law and has a good reputation .
Vanke’s share price rose by the daily limit of 10 percent yesterday morning before it announced the suspension. The stock registered a 62 percent increase since the beginning of this month partly thanks to Baoneng’s investment.
Analysts speculated Vanke’s sudden move may mean the firm using a “poison pill” strategy to deter hostile takeovers by offering discounted new shares to all shareholders except the target, thus diluting the stake owned by the buyer.
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