Date
4 December 2016
Several big investors have been competing to acquire China Vanke, doubling its share price since late 2015. Photo: Caixin
Several big investors have been competing to acquire China Vanke, doubling its share price since late 2015. Photo: Caixin

Why investors hunt for companies with no major shareholders

Bids for China Vanke (000002.CN) have pushed up the share price of the top mainland developer about 100 percent since late 2015.

This is one reason why investors closely track and invest in companies that could become acquisition targets.

Like in the case of Vanke, the absence of a controlling shareholder usually makes a company more vulnerable to attacks.

Those with low valuation, high dividend yield and large capitalization are often preferred by predators, according to a China Securities Daily report.

There are more than 140 companies listed in China that have no majority shareholders.

About half of them are manufacturing firms, while the rest are mainly financial institutions and information technology firms.

As in the case of Vanke, as soon as the market knows some big investor is going after a certain company, small investors tend to jump on the bandwagon in the hope of making a quick killing.

Buying companies with no major shareholders has almost become a key trading theme these days.

Company management is typically against an investor with a totally different background becoming the new boss.

As in the case of Vanke, fights between management and new investors could hamper normal business operations and eventually hurt the company’s long-term value.

Speculators wishing to ride along should be aware of this downside.

Here’s another thing punters following this strategy should understand: Some companies with no major shareholders may be poorly run and have little investment value.

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CG

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