Nongfu Spring Company Chairman Zhong Shanshan attends the Nongfu Spring New Product Launch Conference on February 1, 2015, in Baishan, Jilin Province, China.
Jiang Xin | VCG | Getty Images
BEIJING – The massive introduction of bottled water has propelled its founder to the ranks of China’s three richest people, thanks to the creation of a proprietorship that reflects some of the potential risks of investing in Chinese companies.
Nongfu Spring, the leader in China’s packaged drinking water market, raised about $ 1.1 billion in its initial public offering in Hong Kong on Tuesday, marking the largest IPO ever for a stock exchange this year. Shares briefly rose 85.80%. 39.10 Hong Kong Dollar Lur ($ 4.27) as early as before 39. 390 Hong Kong Dollar Lur (.1.14d) Lore (85.1) .L) are closed at the surface. The stock was up about 2.5% on Wednesday.
Ownership of Nongfu Spring With 84..4% ownership, founder Zonggang Shanshe saw the balloon of his property on paper. According to Forbes, Zhang’s net worth on Tuesday morning was about billion 1 trillion, based on a calculation of 39.30 Hong Kong dollars per share and other holdings.
At that level, according to Forbes, Zong was temporarily the richest man in China, averaging સ 57 billion in Tencent’s Pony Mana and મા 51 billion in Alibaba founder Jack Mani, according to Forbes. According to Wind Information, Zhong was on track to become the third richest person in the country ahead of the IPO.
The flip side of Zhong’s vast assets is that Nongfu’s public holding is less than 4%, according to the company’s prospectus.
“Given the low concentration of shareholders in a small number of shareholders, shareholders and potential investors, it should be noted that the price of shares is also sold in a small number of stocks, and extreme caution should be exercised when operating in stocks,” the company warned in filing.
For the most part, such a low percentage of publicly offered shares and a high level of founder ownership are not uncommon for Chinese companies.
In contrast, the U.S. For most listings of companies, “it is not uncommon for a founder or founding team to own more than 50% of a firm until the firm is announced,” said Markin Kenny, co-director of the Berkeley Roundtable, International Economics and University of California, Davis. Said by.
He noted that the very successful U.S. For start-ups, founders don’t have to give up as much equity and can often hold about 30% or 35% more than the initial public offering fur. But, “this high level of holding is not uncommon for a Chinese IPO.” “Moreover, because these are VIEs / WOFEs (such as specific holding structures) there are a lot of unusual transactions that happen and in the US context that seem like a self-transaction (especially in the case of other companies’ spins).”
While not guaranteed, a more diverse proprietary structure can help protect against fraud.
“Xu Ning, a professor of finance at Tsinghua University, said the blockholder (influential shareholder) may have so much control over the company that the internal or external audit mechanism may not work. “Such ownership can lead to some financial irregularities,” he said in a phone interview.
Xu noted that in his observations, U.S. The voting rights for large technol for G companies can be just as concentrated even if they are not owned.
Chinese and U.S. The main difference between the financial markets remains regulation, he added, adding that the punishment for violating securities laws in China is the same as in the U.S. Is relatively less serious than.
Mainland Chinese stocks are among the best performers in the world this year. The CSI 300 is up more than 12.5% and the Shanghai Composite is up more than 5%, while the S&P 500 is down about 3% and Hong Kong’s Hang Seng is down more than 13%.
The expectation of relatively good returns from Chinese wealth has also attracted foreign investors. Mainland Chinese financial markets were difficult to reach from outside the country, but the introduction of the stock connects Hong Kong and the inclusion of some mainland stocks in the larger global stock index helps to gradually increase foreign exposure to Chinese stocks.
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