China Petroleum & Chemical (Sinopec) saw its share price fall 6.4 per cent yesterday after it announced a surprise HK$24 billion sale of shares to a small number of select investors at a big discount. The world's second-largest crude oil refiner by capacity said on Monday night it had hired Goldman Sachs as the global co-ordinator of its sale of 2.84 billion new H shares at HK$8.45 each, a 9.5 per cent discount to Monday's close of HK$9.34. The stock closed yesterday at HK$8.74. The shares, representing 17 per cent of the existing number of H shares, would be sold to between six and 10 "qualified" independent investors, Sinopec said. It did not name them. Unnamed sources said Chinese Estates and sovereign wealth funds were among the buyers. Chinese Estates was not available for comment. Sinopec said the proceeds from the sale would be used "for general corporate purposes". "The timing [of the share sale], the magnitude of the discount and the decision to offer to a small group of shareholders surprised us," Sanford Bernstein analysts wrote in a research report. "[This is] a major disappointment to minority shareholders and us alike. The timing and selective approach … is difficult to fully understand." The 9.5 per cent discount was sharp compared to the 3 to 7.6 per cent seen in other big sales - including those that involved AIA, Industrial and Commercial Bank of China, Kunlun Energy and CNOOC, each of which raised US$1 billion to US$6.4 billion - a Bank of America Merrill Lynch research note said. A Citi report said Sinopec management refused to name investors and only said some were existing shareholders. Sinopec's spokesman could not be reached for comment. Corporate governance advocate David Webb said existing investors had lost out as the value of their investments fell because of the decision to allow only a few investors favoured by Sinopec's management and underwriter to buy the shares at a discount. "This is unfair to existing shareholders. Sinopec should have raised the funds via a rights issue," Webb said. "This way, if existing shareholders choose not to exercise their right to buy more shares, they can sell their rights and pocket the value of the discount." Under the listing rules, a company only needs to disclose the identities of the investors if it sells shares to fewer than six investors. Analysts expect Sinopec to use the proceeds to fund the acquisition of assets from its parent firm China Petrochemical. The prime targets were Addax Petroleum, bought in 2009 for US$7.5 billion, and Canadian oil sands resource developer Syncrude, in which the parent took a 9 per cent stake in 2010 for US$4.6 billion.