“We have lost contact with the chairman” is an embarrassing announcement made by the board of directors of a listed company to investors. This could lead to a collapse in stock prices. In China, the resulting disruption could last for months and cast a shadow over businesses. Such announcements have become so common this year that state-run newspaper Security Times is offering advice to directors dealing with disappearances. in November. This was a reminder that companies have a responsibility to keep investors informed about important events that affect their operations. This includes the chairman and chief executive officer, who are inexplicably unavailable.
Two listed Chinese companies, a children’s fitness company and an agricultural company, warned investors on November 29 that their chairman and others had disappeared without a trace. Fitness company My Gym Education said, “We tried to contact you by phone and WeChat messaging, but Chairman Wang Hongying could not be reached.” “After contacting her family, the company could not determine the reason for Ms. Wang Hongying’s loss.” Contact her. ”
These latest cases come on the heels of two other unusual disappearances at a live streaming company and a pharmaceutical company earlier in the month. All told, at least 11 Chinese listed companies have been forced to make disclosures this year warning investors about the disappearance of executives or directors. A close examination of company disclosures and Chinese media reports shows that this strange phenomenon will become even more common in 2023.
When a company reports a boss missing, the boss is usually assumed to be in police custody. A look at this year’s events suggests the same thing. In rare cases, the police may issue a statement. In November, about two weeks after the chief executive of livestreamer DouYu disappeared, police in southwestern Chengdu confirmed that he had been detained. He is accused of operating a casino. In many cases, authorities remain silent. China has not publicly acknowledged the detention of businessman Xiao Jianhua, who was abducted by Chinese agents in Hong Kong in 2017 and imprisoned in 2022, but the fact remains with Canadian authorities, where Xiao is also a citizen. confirmed by.
It is common for companies themselves to inform investors about the restraints. In February, China Renaissance announced that its chairman, Bao Fan, was “cooperating with an investigation being conducted by certain authorities in the People’s Republic of China.” The revelation came 10 days after the luxury investment bank reported a mysterious absence. Bao is still missing and authorities have not confirmed his whereabouts. ) Real estate developer China Fortune Land Development said its co-chairman “resigned from the board” after the company confirmed Bao’s detention.
However, even knowing this, it is natural for investors to be concerned. Stock prices of affected companies usually plummet on this news. The price of China Renaissance’s Hong Kong-listed shares fell about 30% in February as rumors of Bao’s disappearance began to spread. It has remained around that level ever since. This year, when the chairman of successful hedge fund Greenwoods Asset Management was detained, wealthy Chinese grew concerned about a broader crackdown on asset managers handling their wealth.
Executives most often disappear from companies with large debts. This year, the most common profile was the chairman of a real estate development company. The industry has experienced widespread defaults over the past two years. The two recent cases in November both involve asset management company Zhongzhi, which recently announced it had $36 billion in outstanding debt. Zhongzhi holds large stakes in both fitness and agricultural companies, as well as dozens of other large publicly traded companies. As China’s economy slows, more companies are likely to go bankrupt and their bosses will go missing.
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