William Lo, a well-known financial writer in Hong Kong, contributed this article to NextInsight
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Small shareholders urged to vote down interest-eroding resolutions A landmark case of self-resuscitation by small shareholders using their scattered, patchy votes has been staged, potentially putting an end to the tyranny of substantial ownership in at least a Hong Kong-listed company. |
FDG Electric Vehicles’ core businesses include ground-up research, design and development, and manufacturing and sales of pure electric vehicles; manufacturing and sales of lithium-ion batteries and cathode materials for lithium-ion batteries.
Photo: CompanyYet this board reshuffle, which requires shareholders’ approval through an extraordinary general meeting to be held in mid-March, had failed to pull the brake on the rights issue. Jingang, having resolved to go for vengeance at any price, has filed a petition to the Supreme Court of Bermuda for the winding-up of FDG before the EGM is being held.
This case is analogous with the Judgment of Solomon, a story from the Hebrew Bible in which King Solomon of Israel ruled between two women both claiming to be the mother of a child. Solomon revealed their true feelings and relationship to the child by suggesting to cut the baby in two, with each woman to receive half. With this strategy, he was able to discern the non-mother as the woman who entirely approved of this proposal, while the actual mother begged that the sword might be sheathed and the child committed to the care of her rival.
For Jingang and all major players behind it, the calculation is straight forward: Jingang does not believe in the rights issue and would not appropriate extra funds to subscribe for the rights shares it entitled. Yet Jingang would not want its interest in FDG to be diluted if the unsubscribed rights shares are being underwritten and sold to other investors. Jingang has therefore opted to wind up FDG and break down the Company’s assets for sale through auctions, hoping to grab something of value through the process.
Jingang’s overstretched ambitions
There is no shortage of institutional investors seeking to profit from adopting a breakup strategy in the global marketplace. While most of them have managed to implement this strategy high-handed, Jingang is far from eligible to be one of them. It has already run out of tricks as shown in the announcements uploaded recently by FDG.
First, FDG discovered that Jingang misrepresented that it was not a FDG shareholder during the October 2019 top-up share placement, and that it had dealt in FDG shares when the FDG Board was negotiating and contemplating placing arrangements. These dealings had contravened the Securities and Futures Ordinance.
Second, the candidates nominated to be appointed to the Board by Jingang are all lacking in relevant experiences in the electric vehicle industry or in discharging duties as directors of Hong Kong-listed companies. One of the candidates is found to be the daughter-in-law of Jingang’s controlling shareholder, constituting key information which has not been previously disclosed.
Given all this precedence, small shareholders are reminded to make informed decisions when casting their votes for a resolution for the removal of incumbent directors and the appointment of new directors will be tabled in the forthcoming SGM to the held on Sunday, 15 March 2020.