Ooops! Guotai says sorry for misrepresenting Didi ‘executive’
Guotai Junan Securities, China’s fourth-largest brokerage, apologised last night to Didi Chuxing after an event organising subcontractor misrepresented a hired speaker as a Didi executive during a conference call with journalists and securities analysts.
The Tuesday call, which followed Didi’s Monday takeover of Uber’s China operations, featured a speaker who identified himself as “Zhang Zong”, or “Executive Zhang” on Guotai’s invitations. In a widely circulated blog, Chinese website Sina.com identified “Executive Zhang” as Didi’s vice president Zhang Bei, quoting him in saying that the car-hailing company would cut passenger subsidies after its Uber China takeover.
On Tuesday afternoon, Didi issued a press statement saying that the real Zhang Bei hadn’t spoken at Guotai’s conference call, denied ever making any official pronouncement about its subsidies and asked the brokerage to apologise.
“We have confirmed internally that Zhang Bei has never attended any teleconference with any brokerage companies,’’ Didi said in a statement. “The speaker in the meeting was not Zhang Bei himself. We have reported the case to the public security organisation.”
Following Didi’s denial, Sina.com removed its blog from its website on Tuesday afternoon.
Investment banks and brokers often organise road shows for corporate executives to meet potential investors to raise awareness about pending initial public offers or other financing needs.
In China, road shows take on a broader meaning that often involve a jostling by brokers, public relations firms and sundry event organisers for media attention. Large brokers including Guotai often operate subsidiaries that can organise hundreds of events, conference calls every year that are marketed as “road shows,” putting a litany of corporate executives, economists and analysts on their rosters to display their ties to Chinese companies.
“Guotai may want to prove it has competitive resources by holding a teleconference with a senior executive of the company attending,” said GF Securities Hong Kong’s Managing Director Alex Fan.
The Chinese broker was the result of a 1999 merger between Shanghai-based Guotai Securities and Shenzhen-based Junan Securities. With 232 outlets in China, it’s one of the biggest brands in China’s securities industry, operating in initial public offerings, mergers and acquisitions, share placements and trading businesses. The broker’s shares are traded in Hong Kong.
Guotai was given an “AA” rating, the highest rating among peers, in a July review by the China Securities Regulatory Commission review to assess the general condition in compliance management and risk control of mainland China’s brokers.
Despite the breadth of its business, Guotai’s Tuesday call after the largest takeover in China’s car-hailing industry was a case of mistaken identity.
“Guotai did not verify the identity of the speaker ahead of the teleconference,” Didi said. “It has made a serious negative impact on our company.”
As it turned out, the speaker on the Guotai call wasn’t even under Didi’s employment, according to a Guotai statement published on its verified WeChat account.
To be sure, Guotai’s invitation never actually fully identified the invited speaker as Zhang Bei.
“We are deeply sorry to Didi and Zhang Bei himself,” Guotai said, without revealing the true identity of the speaker. “The third-party company will be held accountable.”
Didi this week took over Uber’s China operations in a US$35 billion merger, after receiving a US$1 billion investment by Apple Inc in May. The Chinese company may sell shares in an initial public offering in the US in 2017, or in 2018, some analysts said.
“The size of Didi’s business already makes it an eye-catching target on the capital markets,” said GF Securities’ Fan. “It means potential investment opportunities.”
The Ministry of Commerce and the National Development and Reform Commission of China have both voiced concerns about the potential monopoly brought about by Didi’s takeover of Uber’s China business, and are closely following the deal.
Additional reporting by Jennifer Li