“Individual shareholders maintain large controlling stakes at Chinese companies and the minorities are usually individual investors, making it difficult, but not impossible, for shareholder activists to rally support. This is of course somewhat different for Chinese companies listed in overseas markets.”
Paul Marriott, Senior Managing Director
Country:
China
Average % of insider ownership:
Activism
Threat Level
To learn more about this country, please click on the tabs below
While China has seen some cases of shareholder activism, it is still uncommon. Most of its public companies have a controlling shareholder, often remaining family-controlled, and the country has a high density of individual retail investors which mean that activism is neither a common or particularly effective practice in China. However, the current assessment of the country’s state-owned enterprises could create an opportunity for pioneering funds.
Shareholders reaching or exceeding the 5% threshold must disclose their voting rights to the China Securities Regulatory Commission and the China Stock Exchange, as well as the company, and notify the public within three days from the transaction day. No further transactions can take place during this period of time.
While poison pills are permitted for Chinese companies, A Shares regulations make it difficult for companies to issue preference shares. Additionally, this strategy cannot be used without approval obtained in a shareholders’ meeting. Companies do, however, have the right to amend and enact their Articles to protect themselves against hostile acquisitions (e.g. setting the procedures of changing directors in a way to ban the investor from obtaining the managerial power of the company within certain years).
Pac-Man defense, whereby the target firm then tries to acquire the company that has made the hostile takeover attempt, is another common defense tactic for Chinese companies.
Top Campaigns by Type
1. Removal of CEO or other Board member
2. Gain Board Representation
3. Replace Auditor
Campaigns By Year
Total
Campaigns
Notable Invested Activists
• Xin Tong Chan Development (Shenzhen) Co., Ltd.
• Glaucus Research Group
• Baoneng Group
Recent activism campaigns
| Baidu Inc | VS. |
GeoInvesting |
| Shenzhen Expressway Co, Ltd. | VS. |
Xin Tong Chan Development (Shenzhen) Co., Ltd. |
| Fuguiniao Co., Ltd | VS. |
Hong Yuhui |
Total Active
Campaigns
Contact FTI Consulting
Capital Markets Research and Activist Engagement
Managing Director
+1 312 861 4721
Geoff.Serednesky@FTIConsulting.com
Senior Managing Director
+852-3768 4537
Cara.Obrien@fticonsulting.com