Nam Tai Electronics Pulls An Incredibly Sleazy Stunt....

Nam Tai Electronics, traded under the symbol NTE on the New York Stock Exchange announced this past weekend that they intended on taking their two Hong Kong listed companies private. One may say ok, so what. However, there are some interesting facets to this exercise that one should be aware of.

The Hong Kong listed entity [HK 2633] dropped dramatically during August, as indicated on the following chart....



Normally, I would say so what. Some times shares go down and this is normal. Sometimes a large seller of the stock decides that there is too much risk with the company or that earnings prospects do not look as bright as they once were and sells shares. However, this situation is even more interesting. The US listed company sold shares of the Hong Kong company as follows:

....528,000 shares @ HKD 1.625 11 Aug 2005
14,585,000 shares @ HKD 1.754 10 Aug 2005
..6,024,000 shares @ HKD 1.858 09 Aug 2005
..1,437,000 shares @ HKD 1.943 08 Aug 2005

As reported by the HK stock Exchange here. Please note that the dramatic fall in price coincided with the share sale by Nam Tai itself. The stock fell from around HK2.00 per share at the beginning of the month to around HK1.40 or a drop of nearly 30%. I looked at the news services and other news sources and I see NO MATERIAL PUBLIC INFORMATION that the company released that could possibly account for the fall in price of that magnitude. Additionally, it appears as if other market participants got wind of the share sale plan and ran infront of the sale since the share price drop started before Nam Tai did the selling.

And the mystifying sale by the company itself represented several times the normal daily volume that trade on the HK Stock Exchange. So, market participants probably wondered what was going on with the company and as a reflex stayed away from buying the shares until the situation was straightened out.

So, what did the company do? Last weekend they offered to buy out the remaining shareholders at HK1.80. This price is just too cheap for this company at around 7 times trailing earnings when the New York Stock Exchange listed shares trade at around 20 times earnings. This is just another example of the screwing by sleazy managers of the minority shareholders in Hong Kong. It is shameless and the management of this company should be chastised for the greedy and manipulative and possibly illegal behavior that they have engaged in. Others have also noted the sleazy behavior. The mangers and directors names can be found here.

And what will the HK Stock Exchange do? They rarely do anything in these situations ecept explain to exasperated people that there is nothing illegal in what they have [even though it appears as if the company intended to manipulate the price lower] and go back to sleep on their desks. The HK Stock Exchange inexplicably has done a very very poor job of protecting minority shareholders rights and tend to favor the tycoons over the indivdual shareholder. Its truly a sad state of affairs for Hong Kong and the transparency of the markets in this part of the world. Sleaziness abounds in the boardrooms in the SAR and the people of Hong Kong are the ones that will suffer.

For disclosure purposes, I have been or currently shareholders of both the New York listed and Hong Kong listed entities. I purchased New York listed NTE shares late last year at $19.39 and sold them this year at $27.50 for a profit of around US$6,500. Additionally, I purchased a small amount of shares in Hong Kong at around HK$1.40 in August and still hold them. So I am not a completely disinterested party in the outcome of this situation.