Ping An Insurance (Group)'s mega-refinancing plan was dealt a further blow after a mouthpiece of the Communist Party made the rare move of criticising the insurer for treating the stock market as a cash machine.
The People's Daily - which closely reflects official opinion - said Ping An's plan to sell 1.2 billion A shares and to issue 41.2 billion yuan of convertible bonds had triggered heated debate, with investors expressing displeasure by selling down the stock.
'Some companies may take advantage of the policy loopholes and treat the stock market as a cash machine, raising additional capital in large amounts,' the newspaper said. 'This may backfire and investor confidence has already been hurt.'
Based on the A-share closing price on January 18 when Ping An announced the fund-raising scheme, the total amount of the share sale and convertible bonds exceeds 160 billion yuan, making it the largest equity refinancing bid in the country's capital market.
Except for saying that the money would be used to fund mergers and acquisitions 'in line with the company's diversified business strategy', Ping An has not been forthcoming with explaining the use of proceeds.
The newspaper's remarks are expected to add pressure on Ping An to reconsider the share sale, which has also been criticised by some fund managers, or to reveal more details of its purpose.
The company's Shanghai shares have fallen the 10 per cent daily limit on a number of days since the capital-raising plan was announced.