Sina Weibo

Chinese internet giant Sina digs in over proxy battle with US shareholder Aristeia

Acrimonious dispute between the Chinese internet firm and US investment manager looks unlikely to be resolved outside the company’s AGM

PUBLISHED : Monday, 09 October, 2017, 7:31am
UPDATED : Monday, 09 October, 2017, 7:30am

The acrimonious proxy battle between Chinese internet company Sina and one of its major shareholders, US investment manager Aristeia Capital, is looking more like it will have to be resolved in a vote at Sina’s annual general meeting (AGM), with no indications a compromise is in sight.

Sina owns a major stake in social media firm Weibo, as well as operating mobile and desktop internet portals, and is listed on Nasdaq.

Last week both Sina and Aristeia sent strongly worded letters to Sina’s shareholders urging them to back their respective nominees at next month’s AGM, while each party also came close to accusing the other of lying.

The case is illustrative of the growing number of shareholder fights taking place in Asia.

“While it’s not entirely impossible that there could be a settlement, it feels like the situation is going to have to be resolved by a vote at the AGM,” said a person familiar with Sina and Aristeia’s dispute, who requested anonymity as they were not permitted to speak publicly on the issue.

Sina’s AGM will take place on November 3 in Hong Kong, when shareholders will vote on whether to accept the addition of two nominees from Aristeia to Sina’s board. They will also vote on whether to reappoint Zhang Yichen, one of Sina’s existing board members who is up for re-election, and backed by the other four current directors.

New York investment manager Aristeia targets Sina in proxy battle

Sina opposes the appointment of Aristeia’s two nominees, Thomas Manning and Brett Krause, and in a letter to shareholders last Tuesday the internet firm said Aristeia had resorted to personal attacks and half truths. It also said that through its nominees to the board, Aristeia was seeking to implement “a risky and value-destructive agenda”. The internet firm said that Manning and Krause lacked understanding of the Chinese regulatory environment, and that they would be compensated by Aristeia, and so would not be able to function independently of the investment manager.

Aristeia hit back in a letter on Thursday, saying that Sina had disingenuously distorted its suggestions. It said that adding Manning and Krause to the board would “bring fresh voices to Sina’s undersized and insular board,” and that Sina’s attempts to characterise the two as lacking understanding of the Chinese market “smacks of xenophobia”.

Aristeia owns around three million Sina shares making it one of the company’s top five shareholders.

The dispute between the two entered the public domain last month, first reported by The Wall Street Journal.

Aristeia issued a press release on September 18, in which it alleged substantial corporate governance failings at Sina, and said that as a result of these there was a substantial gap between Sina’s valuation and the value of its assets.

Sina’s 46 per cent stake in Weibo is worth around 130 per cent of Sina’s entire market capitalisation.

“Even though Sina is a Chinese company, the proxy battle is developing along the same lines as other similar battles in the United States,” said the source.

However, proxy battles are becoming more common both in Greater China and across Asia as a whole.

In the first nine months of this year there were 49 companies targeted by activist shareholders. In 2013 overall, there were just 34.

“In the last few years we have seen significant increases in shareholders’ engagement with companies’ boards, and as that engagement sometimes breaks down, we have also seen a rise in activist shareholders,” said Dominic Wai, a partner at ONC lawyers in Hong Kong.

Wai said one of the reasons for this was that regulators across Asia have brought in stricter standards around corporate governance, and this had given shareholders greater opportunities to take action when they consider companies are not meeting these standards.

Explainer: What is Bank of East Asia and Elliott’s dispute about?

High profile examples in Hong Kong include Spring reit, a Hong Kong based real estate investment trust which has clashed with PAG, an alternative investment manager, and Bank of East Asia which is locked in a bitter legal dispute with US hedge fund Elliott Management.

Elliott has also sparred with Samsung Electronics in South Korea.