Sina Weibo

Sina claims victory in boardroom tussle with US hedge fund Aristeia

Aristeia had forced a vote among Sina shareholders at its AGM over whether the company should consider changes in its top team to resolve corporate governance issues

PUBLISHED : Friday, 03 November, 2017, 10:18pm
UPDATED : Friday, 03 November, 2017, 10:50pm

Sina, the Chinese internet company, has claimed victory in its shareholder battle with US hedge fund Aristeia Capital, after shareholders at its annual general meeting (AGM) on Friday voted against adding Aristeia’s nominees to its board.

Aristeia, which says it is one of Sina’s top five shareholders, had sought two additional directors on Sina’s board and also to vote to remove the one incumbent director who was up for re-election.

The US-based fund claimed this would help resolve corporate governance issues which it said had hurt Sina’s share price. However, Sina’s shareholders rejected the arguments.

In statement issued after the meeting, the firm said shareholders had voted to re-elect incumbent Zhang Yichan to the board, and not elect Aristeia’s nominees Brett Krause and Thomas Manning.

Sina operates mobile and online digital platforms, on which it publishes news and entertainment, and founded social media platform Weibo, which it spun off as a separate entity in 2014, while maintaining a minority stake.

When it launched its campaign in September, Aristeia said Sina’s 46 per cent stake in Weibo was worth 130 per cent of the internet firm’s entire market capitalisation, and that Sina’s shares traded at a 41 per cent discount to their net asset value. It claimed the cause of the discount was corporate governance failings.

Zhang was re-elected by a large margin (85 per cent of the votes cast, according to Sina), but the decision on Aristeia’s nominees was closer, with only 55 per cent of votes cast against adding Thomas Manning to Sina’s board.

“Sina’s board and management team are grateful for shareholders’ support, input and participation in our 2017 Annual General Meeting,” said Charles Chao, Sina’s chief executive and chairman in a statement. He owns a 12.9 per cent stake in Sina, according to CLSA.

Proxy advisory firm ISS had advised shareholders to elect Aristeia’s nominee Manning, noting there were “a number of governance issues at play” but advised shareholders to reject Krause.

They also said, however, they felt there were significant flaws in Aristeia’s proposals, which included selling Sina to a third party, or splitting off Sina’s stake in Weibo.

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

Robert Lynch Jnr a partner at Aristeia said the fund would continue its campaign.

“That this contest was close – and that its outcome could have been different if the vote of any single, material shareholder had changed – should send a clear message to Sina that its shareholders’ patience will not be infinite,” he said in a statement.

“We will continue to pursue all avenues – including, if they are willing to engage with us, by working directly with Sina’s leaders – to further the goals of maximising shareholder value and enhancing corporate governance that we began with this contest.”

Analysts say Aristeia’s set back would have little effect on shareholder activism in Asia, which is on the rise.

In the first nine months of this year there were 49 companies targeted by activist shareholders, according to data from Activist Insight, against just 34 in the whole of 2013.

“This means nothing [for shareholder activism], it is just a bump in the road,” said Ami de Chapeaurouge, founding partner of law firm de Chapeaurouge and partners.

“Activism is much more pervasive in Hong Kong than reported in the press.”

Sina’s shares have risen by 90 per cent this year to date, thanks particularly to a 128 per cent rise in Weibo’s shares.