Last week, one of the most widely circulated weibo posts began: “Using Shanghai’s garbage-sorting system [for more on this topic, see WiC458], which category does Wang Zhenhua belong to?”
The punchline: “You are insulting the garbage.”
Wang is the founder of Shanghai-listed property developer Seazen Holdings. At his peak he was worth $4.4 billion and was China’s 108th richest man, according to a Forbes’ ranking. However, the comparison with trash began to circulate after Shanghai’s Pudong district police department said the billionaire had been detained on charges of child molestation.
According to local media reports, the news broke earlier this month after a woman filed a complaint to police alleging Wang had abused her nine year-old daughter in a five-star hotel in Shanghai.
The damning allegations quickly saw a plunge in the shares of three listed companies – including Seazen and the Hong Kong-listed Future Land – that are all connected to Wang. Future Land lost Rmb26 billion – roughly one-third – of its market value in two days. In total, around Rmb30 billion ($4.36 billion) of the corporate trio’s market capitalisation has been wiped out.
After news of Wang’s arrest went viral, Future Land issued a statement to the Hong Kong Stock Exchange declaring that he was being held in police custody for “personal reasons, and he has already been removed as company chairman. His son Wang Xiaosong has been selected as the new executive chairman”.
Meanwhile, Shanghai police said that although Wang had not been formally charged, he was being held under criminal detention.
“Wang, who is a successful businessman, a philanthropist, a national model worker, took children as his plaything. This is so dirty and obscene,” was the denunciation made by the Central Political and Legal Affairs Commission.
Founded in 1993 in Changzhou in Jiangsu province, Future Land ranked eighth among China’s largest developers last year, after the now Shanghai headquartered firm reported Rmb220 billion in contracted sales, up 75% compared with a year earlier.
“Future Land has been the dark horse in the real estate industry in recent years,” reckoned National Business Daily.
“It mainly focuses on the third- and fourth-tier cities and has expanded rapidly. In the eyes of industry insiders, however, Future Land has always been a very low-key but competitive type of company. Starting from a few years ago, it regularly conducted its meetings on the weekends, which led to complaints by the employees.”
According to NBD, the total assets of Future Land rose dramatically in 2018, reaching Rmb303 billion, a year-on-year increase of about 80%, of which Rmb145.6 billion comprised unsold inventories, a year-on-year increase of 91%. That suggests that the inventory surge accounted for 44% of total assets, a statistic that likely reflects trouble finding buyers.
Its inventory data isn’t the only alarming figure. The company may have to pay back as much as Rmb6.3 billion of debt in the second half of this year (including bonds with early redemption provisions), estimates Caixin Weekly.
While Future Land shouldn’t have a problem paying down its short-term debt, the latest scandal will drive up its borrowing costs, which were already relatively high compared with its peers. Its average cost of debt was 6.47% last year, a level more normally paid by third-tier property developers, according to Guosheng Securities.
Meanwhile, images of Wang behind bars were shown in a report this week by state broadcaster CCTV although his face was pixellated.
The Chinese media is already arguing for tough sentencing for Wang if he’s found guilty (he could even face a death sentence).
TMT Post believes that as a chairman of a listed company, and as a well-known public figure, Wang – if convicted – should be given a more punitive sentence than an ordinary citizen. “We also urge the police to investigate the issue thoroughly because it hardly seems like it is Wang’s first offence,” the portal concluded.
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