It’s great business to sell a stake in your company and buy it back at a fraction of the selling price in less than two years, but certainly not for the counterparties who get the short end of the stick.
This is what happened to Jumei and the foreign investors who believed in its future.
The Chinese online beauty product vendor was listed in the United States in May 2014.
Following a sustained share price slump, the company’s founders are now offering to take the e-tailer private.
Representing the buyers’ group, chairman Chen Ou and chief executive Yusen Dai, co-founders of Jumei, announced a plan last week to acquire all outstanding shares of the company they do not already own at US$7 each, or 32 percent of its initial public offering price of US$22.
The buyers’ group owns 54 percent of all shares but holds more than 90 percent of the voting power, so it is almost a done deal.
Imagine how disappointing it is for small investors who bought Jumei’s e-commerce concept and mainland consumption potential.
Not only did they see a consistent decline in the company’s share price, they are now being short-changed and forced to sell at a depressed level.
On the stock’s first trading day when it closed 10 percent higher, Chen told the state news agency Xinhua he was happy with the stock performance, adding that the IPO would help Jumei “cooperate with international brands and partners to better serve its domestic consumers”.
“An IPO in the US will give Jumei a good platform to expose its brand and services,” Chen told China Daily.
But in its latest letter to investors, as cited by CCB International, Chen now believes taking the firm private will give management more flexibility to concentrate on business operations and create a startup environment that would offer better incentives to employees.
Small investors would probably find nothing more ironic than opening the company website and seeing emblazoned on its Investor Relations section four big Chinese letters that say, “Trust us.” (相信我们).
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