Last Updated on 2023/02/17
Table of Contents
China Renaissance Group faces uncertain future amid regulatory crackdown and economic struggles
China Renaissance Holdings Ltd suffered a massive blow as its shares dropped by up to 50% on Friday, following the revelation that the investment bank is unable to contact its Chairman and Chief Executive, Fan Bao. Bao, the founder and controlling shareholder of the company, has been reported missing in the latest disappearance of a top business executive, causing the Hong Kong-listed stock to hit a record low of HK$5 in early trade. This resulted in a loss of HK$2.8 billion ($357 million) in market value.
The stock did manage to recover slightly later in the day, only falling by 28% in the Hong Kong market, which was itself down by 0.7%. The nearly 30 million shares of the boutique investment bank traded on Friday were the highest on record.
Despite the significant loss, the mainland China-based bank has stated that the board is not aware of any information that indicates Mr. Bao’s unavailability is or might be related to the business and/or operations of the Group, which are continuing normally. This was outlined in a filing on Thursday evening. When Reuters reached out to China Renaissance for comment on Friday, a spokesperson for the bank referred to the investment bank’s public filing.
Bao’s disappearance is the latest in a series of high-profile cases where Chinese executives have gone missing without a clear explanation during a sweeping anti-corruption campaign spearheaded by President Xi Jinping. In 2015 alone, at least five executives became unreachable without prior notice to their companies, including Fosun Group Chairman Guo Guangchang, who Fosun later said was assisting with investigations regarding a personal matter. The situation surrounding Bao remains unclear, and the lack of communication has shaken the market and investors.
The recent disappearance of Fan Bao, Chairman and Chief Executive of China Renaissance Holdings Ltd, has come at a time when China’s border reopening and renewed focus on boosting the sagging economy has brightened the outlook for deals. The situation has been further improved with an easing of a regulatory crackdown on technology firms.
Bao, who has previously worked for Credit Suisse Group AG and Morgan Stanley, has been recognized as one of China’s best-connected bankers. He has been involved in major technology mergers, including the tie-up of ride-hailing firms Didi and Kuaidi, food delivery giants Meituan and Dianping, and travel devices platforms Ctrip and Qunar.
According to Dickie Wong, Executive Director of Research at Kingston Securities, “If a listed company voluntarily discloses that a senior manager or a major shareholder cannot be contacted, it’s truly unusual, as the person might have been out of reach for some time.” He further added that investors’ worst nightmare is that a company’s ability to continue operation is impaired, which is why a stock sell-off is not surprising given the uncertainty.
Bao has been an active figure at the helm of China Renaissance, taking an increasingly active role in the group’s private equity business in recent years. The company is currently ranked ninth on China’s equity capital markets leagues table for 2023, according to Refinitiv, after it advised on Jiangsu Sanfame Polyester Material’s $363 million convertible bond last month. The company earned $20.6 million in Chinese related investment banking fees in 2022, down from $43.13 million a year earlier, as per the data provided.
China Renaissance, which Bao started in 2005 and listed in Hong Kong in 2018 after raising $346 million, has acted as an adviser for some of China’s biggest tech initial public offerings (IPOs), including JD.Com Inc and Kuaishou Technology, as well as Didi’s New York listing in 2021. However, Didi had run afoul of the Chinese regulators when it pressed ahead with the U.S. stock listing against the regulator’s will, according to sources who spoke to Reuters.
Apart from being an active advisor, China Renaissance is also an active investor in the tech sector. In 2019, it raised more than 6.5 billion yuan ($945 million) in a yuan-denominated fund.
The recent disappearance of Bao has shaken investors and market sentiment, particularly given its potential implications on the company’s operations. This comes only days after property developer Seazen Group Ltd was unable to contact or reach its vice-chairman, adding to the already growing uncertainty in China’s business world.