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CSRC bans “female Buffett” from share trading


Zhao: bye to the bourse

For Chinese viewers Zhao Wei is best known for her role as “Little Swallow” in the 1998 TV series My Fair Princess but more recently she has earned the more titanic reputation as “China’s female Buffett” or even “the world’s richest actress”.

Her newfound fame is based on Zhao’s midas touch in the stock market. For instance, the actress-director invested Rmb77 million ($12 million) in Zhejiang Talent TV and Film in 2011. The studio went public in Shenzhen four years later and Zhao made a financial return of more than two times.

In 2014, Zhao and her husband Huang Youlong splashed HK$3.1 billion ($400 million) on a stake in Ali Pictures, a Hong Kong-listed studio affiliated with internet giant Alibaba, at HK$1.6 per share. The couple would cash in over HK$1 billion only a few months later by selling a large chunk of their stock at HK$3.9 apiece.

However, Zhao won’t be putting her investment acumen to use in China’s stock market – at least not for a while. Early this month, the China Securities Regulatory Commission (CSRC) accused the 41 year-old and her husband of “seriously misleading the market and investors”, and banned the couple from the securities market for five years.

Last December, Zhao and Huang grabbed headlines when they proposed to pay Rmb3 billion for a 29.1% stake in Zhejiang People Culture, a Shanghai-listed animation company which, barely a year earlier, was lossmaking. The couple’s takeover plan, however, would value the showbiz start-up at Rmb10 billion. Moreover, the deal was a highly leveraged one, as Zhao and Huang proposed to pay only Rmb60 million upfront while the rest would be financed by loans from little known financial institutions based in Tibet (see WiC353).

Zhao’s bid stoked frenzied buying interest in Zhejiang People Culture as well as the attention of the CSRC, which demanded more information about the deal. Zhao and Huang later decided to abandon their investment plan triggering a sell-off in the company’s shares.

Many retail investors suffered tremendous losses, Sina Finance noted, as Zhejiang People Culture’s share price plummeted to around Rmb9 from as high as Rmb25 after Zhao dropped her bid.

“The information asymmetry means that small retail investors became the biggest casualty,” Sina Finance commented. “Zhao Wei, on the other hand, suffered no losses.”

In fact, Zhejiang People Culture (which has since been taken over by another company and renamed Zhejiang Sunriver) returned to Zhao a Rmb250 million deposit, which could have been withheld after the deal fell through.

Last week, a statement from the CSRC was filed with the Shanghai Stock Exchange saying that the couple had violated disclosure rules by playing up merger and acquisition intentions without sufficient resources or backing from financial institutions. Zhao and her husband were also found guilty of falsifying some of the information in disclosures.

According to the market watchdog, Zhao had created ‘enormous volatility’ in Zhejiang People Culture’s share price because of her fame, which had “skewed the market”. As a result the CSRC also imposed fines worth Rmb1.2 million on Zhao and the related parties in the lapsed takeover bid.

Huang, however, rejected the ruling. Through his Hong Kong-listed company Sino Golf Holdings, the businessman said that he would “submit a statement and plea to the CSRC to request a hearing” on the five-year ban.

Zhao and Huang have other problems to tackle as well. A group of retail investors in Zhejiang People Culture have hired a lawyer to represent them in a class action.

Wang Zhibin, a lawyer at the Shanghai-based firm Bright and Young, told the South China Morning Post that out-of-pocket retail investors could claim Rmb30 million in compensation because of misleading information linked to the takeover deal.“There are around 4,500 investors who so far have inquired from me about bringing a class action, of which about 100 have sent their trading records to bring about the lawsuit,” Wang said.

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