Still behind bars

Huang: serving his sentence

On the first day of April in 2016, Xinhua announced that there would be no attempt at April Fool’s Day tomfoolery on its watch, in line with a crackdown on the spread of rumours on social media.

In fact, April Fool’s Day spoofing doesn’t have much of a history in China and state media outlets like Xinhua have even less of a reputation for creative humour.

Instead, many of the April 1 headlines this year went to Gome’s founder Huang Guangyu – a tycoon named as China’s richest man just a decade ago, but later sentenced to 14 years in prison for crimes including bribery and insider trading.

Since his incarceration in 2010, any speculation about a reduction in Huang’s jail term has set the share price of the retailing giant on a rollercoaster ride. And such was the case on April 1, when 21CN Business Herald published an interview with the retailer’s investment director Li Hong, and then reported that Huang could be freed as early as next year (his sentence had earlier been cut by three years, lending credence to the idea of further leniency).

The news, which appeared on 21CN’s website, briefly sent Gome’s Hong Kong-listed stock soaring 22% higher. But as on prior occasions, a swift denial by the company soon pared back most of the gain.

Gome initially suggested that Li was misquoted by 21CN. “There has been no change in the release date of Huang Guangyu, that is set on February 16, 2021,” it clarified in a press statement. It then published a stock exchange filing reminding investors that they should only regard a statement from the authorities or a formal announcement from the company as definitive on Huang’s release.

21CN wasn’t pleased to see its market-moving report consigned to the fake news category and it fought back, defending its account by publishing the voice recording of the interview with Li.

On it he was heard as saying: “From our company’s internal perspective, next year basically is the year of the boss’s return. Obviously, this might bring greater passion and enthusiasm to both the capital markets and our staff.”

The recording was made during a lunch between Gome executives and financial journalists in Hong Kong. The meeting was scheduled just days after the company had reported that net losses in 2018 had widened to Rmb4.9 billion ($730 million) from Rmb450 million a year earlier. By “the year of the boss’s return”, Li seemed to be referring to preparations for Huang’s resumption of the chairmanship at Gome. But according to the company’s account, its public relations team had asked reporters not to speculate on when Huang’s stay in jail might come to an end.

WallStreet.cn noted that Gome’s share price had been on a volatile ride in February. “Apparently this will stay as a topic for speculators as long as the authorities don’t have a clear answer on whether there will be further changes to Huang’s jail term,” the news portal said.

Perhaps it says something about investor psychology in China that Gome’s shareholders seem so ready to welcome Huang back. National Business Daily noted that the company’s dismal results last year were largely down to intensifying competition (plus a heavy hit from goodwill; see WiC441 for more on this topic). But it also asked whether shareholders should really believe that Huang’s release will boost the share price so substantially.

The world has changed dramatically since Huang was imprisoned, it warned. Prior to his arrest, Gome was competing with Suning for the crown of China’s leading retailer. But the surge in e-commerce – as well as the more recent advent of O2O sales models – has transformed the retail landscape in the period that Huang has been languishing in jail.

“The rivalry is no longer about one company versus another but one business alliance versus another,” NBD said, noting that Suning had sided with Alibaba, now China’s biggest retailer, in its own bid to prosper.

The implication: if Huang returns to the top job at Gome in 2021, one of his biggest decisions will be which online heavyweight he should ally with.

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