And Finally

Back at the table

Former Lehman boss surfaces in China, with an ambitious new IPO plan

Fuld, former chairman and chief executive officer of Lehman, leaves his seat after testifying in Washington

Dick Fuld: wants to help smaller Chinese firms list in America

On June 11, 2008 Dick Fuld had lunch with five of Lehman Brothers most senior investment bankers. That morning the firm’s stock had fallen 21% and confidence was cratering.

The group was edgy, arguing that the firm’s chief operating officer knew nothing about risk and that he should be fired to reassure the market that change was afoot.

According to Andrew Ross Sorkin’s book Too Big to Fail, Fuld resisted the idea saying he wouldn’t sack Joe Gregory “just because we have one bad quarter”.

One of the senior bankers retorted: “It’s not just a bad quarter. It’s more deep-seated than that.”

At the end of a difficult meal, Fuld asked each of them what they were going to tell their colleagues when they left the room. Jeffrey Weiss gave a no-nonsense reply, saying they’d say of Fuld “that the guy doesn’t get it”.

Fuld’s state of denial would evaporate three months later when Lehman filed for bankruptcy, helping to trigger a global financial crisis. Since then, he has kept a somewhat low-profile. Till now.

Last week the 68 year-old appeared in China, telling Century Weekly that his new mission is to assist the country’s small and medium-sized enterprises (SMEs) with their listing plans in the United States.

The banker explained his vision to the magazine’s reporter over a buffet lunch at a hotel in Beijing this month. The journalist evidently found some parts of the encounter a bit surreal – for example, when the American told him: “I like Chinese pancakes. I ate so many yesterday that I could not sleep all night. But I still want to eat them today.”

Dietary insights out of the way, Fuld then explained his decision to set up another firm after the Lehman debacle: “When you fail you have to pick yourself up and set out again, because you have no choice. You can lie in bed and growl at the moon, but no one will care.”

But the journalist seemed most bemused by a remark Fuld made as he left the table.

After explaining his new venture, he said: “If you sit on the river bank long enough, you will see the enemy’s body floating.” Asked if this was a line from a poem, Fuld replied no, but that he might “compose it into a song”.

So why has Fuld been in Beijing three times this year? It turns out that his firm Thor Partners has teamed up with Suzhou-based Kaida Venture Capital. According to China Daily, the pair intend to acquire a stock exchange in the US, with the aim of using it to list smaller Chinese companies.

With a number of frauds denting investor confidence in Chinese SMEs, Fuld thinks he and his new partner can ensure that only the best companies list on their exchange and, by doing so, bolster the tarnished image of small cap China stocks. How? They will set new standards to vet the companies’ financials and target firms making profits of between $3 million and $8 million. Of course, building up that trust with prospective investors will begin with Kaida, a firm controlled by local businessman Wang Yulong. And as Wang confidently told China Daily: “We will join hands and set new standards, rules and channels for Chinese companies getting listed in the US.”

Fuld is optimistic too, saying that Kaida’s insight and support will give their stock exchange an edge.

“I like my Chinese partner. He is very honest and very practical,” he told Century Weekly.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.