Shareholders eye slice of Gome founder's cash

Vote to accept HK$420m compensation from Wong Kwong-yu brings call for special dividend

PUBLISHED : Friday, 18 April, 2014, 1:17am
UPDATED : Friday, 18 April, 2014, 1:17am

Shareholders of mainland retailer Gome Electrical Appliances yesterday voted almost unanimously for the company to accept HK$420 million from its jailed founder and his wife as compensation for their misconduct in a share repurchase deal six years ago.

The shareholders also demanded a special dividend to distribute the money.

Wong Kwong-yu, once the mainland's wealthiest man now languishing behind bars, along with his wife Du Juan last month reached a settlement with the Securities and Futures Commission under which they agreed to pay HK$420.6 million to Gome as compensation for their misconduct in a 2008 share repurchase agreement. In return, the SFC will not take further action against them, drawing a line under their legal battle.

A shareholders' meeting was hosted by chairman Zhang Dazhong in a Hong Kong hotel yesterday. Wally Wong, a shareholder who holds 10,000 Gome shares, said he voted in favour of the settlement.

Everyone voted [for] the offer. Why should we refuse a HK$420 million windfall?

"Of course everyone voted to accept the offer. Why should we refuse a HK$420 million windfall?" Wong said, adding many small shareholders urged the management to pay out the compensation via a special dividend.

"The management did not say what they plan to do with the money and said they would consider a special dividend. I hope they will pay part or all of the compensation to investors," Wong said.

Another shareholder, who identified herself as Jenny, said she had lost a lot in her investment in Gome as she bought the shares at HK$3 - more than double yesterday's closing price of HK$1.46.

"The compensation would cover some of my losses but not all. Gome once made a lot of money but now with Wong in jail, the company's Hong Kong stores have been closed. It's very disappointing," she said.

"Wong and his wife should pay compensation to small shareholders for their misconduct. Many mainland private enterprises lack transparency and neglect small shareholders.

"Now that the Hong Kong and Shanghai stock exchanges will have a link-up allowing Hong Kong investors to buy Shanghai-listed shares, investors should pay attention to the transparency issue. I prefer investing in Hong Kong-listed blue chips, which have greater corporate transparency."

In the event of a special dividend, Wong and his wife would recoup HK$150 million because they remain the biggest shareholders of Gome with a 36 per cent stake. Other large shareholders include Bain Capital, with 11 per cent; BlackRock, 7 per cent; and Carmignac Gestion, 5 per cent, exchange data shows.

Wong was put behind bars in 2010 after a Beijing court sentenced him to a 14-year prison term and a fine of 600 million yuan for insider trading and other financial crimes.