22 January 2019
Dymatic Chemicals has prepared a gift pack containing 500 grams of pork for each of its 36,000 shareholders. Photo: Facebook
Dymatic Chemicals has prepared a gift pack containing 500 grams of pork for each of its 36,000 shareholders. Photo: Facebook

The practice of sending gifts to shareholders

Not a few people were said to have purchased shares of Dymatic Chemicals Inc. (002054.CN) recently for a special reason – a pack of pork the company has prepared for each shareholder.

The gift pack contains 500 grams of pork, costing around 75 yuan (US$11.75). With over 36,000 shareholders as of the first quarter, the company is estimated to have spent about 2.8 million yuan for the giveaways.

Even if it is considered as a marketing expense, the money is well spent given the strong response.

Dymatic Chemicals’ subsidiary Guangdong Innofarm is engaged in agriculture and pork production so offering pork as gift is not surprising at all.

In fact, it’s a rather common practice among Chinese firms to send gifts related to their businesses to shareholders.

For example, Qinghai Huzhu Barley Wine Co. Ltd. (002646.CN) gave out bottles of white liquor,  Blackcow Food Co. Ltd. (002387.CN) offered cocktail drinks, and Shanghai Shunho New Materials Technology Co. Ltd. (002565.CN) handed out cigarettes.

But there are also cases in which companies send shareholders something totally unrelated to their businesses.

To small shareholders, freebies could be more attractive than cash dividends if the free items are what they want.

Sending shareholders gifts is rather common in US market, too.

For example, McDonald’s send its shareholders burger and fries coupons every year. Starbucks offershareholders free drinks, while Disneyland offers discounts for membership or tickets.

Holders of Warren Buffett’s Berkshire Hathaway stock are invited to the annual shareholders’ meeting in Omaha. They are also offered discounts if they make purchases at Borsheims jewelry store and other companies belonging to the group.

By contrast, Hong Kong-listed firms rarely send gifts to their shareholders.

Perhaps that’s because most retail investors are holding stocks through the Hong Kong Securities Clearing Co. Ltd., rather than having the shares registered directly under their own names, making it rather impractical for companies to offer their shareholders something special, even if they wanted to.

This article appeared in the Hong Kong Economic Journal on May 23

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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