The football club, the chemicals maker and the newspaper group. Or, Hong Kong’s $12bn of trapped capital in prolonged suspended stocks

http://ftalphaville.ft.com/2015/05/14/2129492/the-football-club-the-chemicals-maker-and-the-newspaper-group-or-hong-kongs-12bn-of-trapped-capital/

The football club, the chemicals maker and the newspaper group. Or, Hong Kong’s $12bn of trapped capital

FT Alphaville | May 14 07:18 | 1 comment | Share

By Jennifer Hughes in Hong Kong

Seven weeks of silence. That’s what investors in Tianhe Chemicals have had since the short target said it needed to give its auditors more information and would delay publishing its 2014 results. Thursday marks exactly seven weeks since it made the announcement and suspended its shares at the same time, highlighting one of the less fun aspects of the Hong Kong market – the risk of getting trapped.

A recap:The Chinese speciality chemicals group became a Hong Kong market darling after it listed last June, gaining more than a third between the float and the moment it was attacked by Anonymous Analytics just over two months later. The now standard attack- denial-more attack-lengthy rebuttal process followed. Tianhe vigorously rejected AA’s claims that it had generated a fraction of the sales and profits it had reported.When trading in Tianhe resumed five weeks later, its shares ended the first day down 41 per cent at HK1.37. Since then they have slid further to HK1.17, giving it a market cap of about $3.7bn – half its size pre-attack.

Tianhe, through its PR agency, declined to comment further on progress with its auditor issues. Morgan Stanley, one of the sponsors of the IPO and a big backer of the company via its private equity arm, declined to comment too.

While Tianhe’s trapped investors use the silence to ponder what might happen next, they might want to consider their fellow trappees.

Tianhe hasn’t even been suspended for long enough to make the Hong Kong Exchange’s Prolonged Suspension list a $12.2bn collection, in capitalisation terms, of companies. Some are being wound up but the list also includes Hong Kong’s main newspaper group and the owner of Birmingham City among others.

Real Gold Mining, for example, hasn’t traded since May 2011. At the end of April, it informed shareholders it expected its new auditor to allow it to publish the accounts for 2011 through 2014 from some point in August.

Some are long-running corporate sagas. Birmingham International was only suspended in December, but supporters of Birmingham City (aka The Blues) will remember that Carson Yeung, hairdresser-turned-tycoon boss of Birmingham International which owns the football club, was jailed last year for money laundering and has been manoeuvring since from his jail cell to keep control.

Last week however the receivers of Birmingham International said one of seven offers for the company had been shortlisted.

Other shareholders are trapped in tycoon battles. The SCMP Group, which publishes the South China Morning Post among other titles, has been in the deep freeze for more than two years after its free float fell beneath the required 25 per cent. Majority owned by Robert Kuok, one of Asia’s most established billionaires, the group seemingly can’t get other big shareholders to agree with its plans. Rumours it was about to be taken private before its suspension had helped its shares shoot up.

The reason the Hong Kong exchange suspends so readily is usually attributed to the market’s high retail participation, so that everyone, from investment banks to mom and pop in their corner shop, gets information at the same time. About 20 per cent of of cash trading is done by small-time investors, compared with about 2 per cent in, say, New York.

The HKEx won’t comment on individual companies, but it says it keeps in regular contact with the suspendees and urges them to resume trading as soon as possible. It also has to sign off that any updates are sufficient before trading resumes.

Now, where’s that number for Tianhe again?

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