Interesting video. I am curious how the related party is able to exert influence over the operations given there is likely to be a board in the listed company.
For the Chaoda example, how does the founder who only has 21% of the shares make Chaoda pay for an inflated price for fertiliser? Even if he’s the largest shareholder, decisions are still made collectively by the board.
For the Credit China example, the person involved is a non-executive director. Even though he holds 22.3% shares, he cannot be involved in the day to day ops as he’s a non-exec. How then does he influence the board to pay a price for Shanghai Jifu without any financial data to justify the acquisition price.
On the same example (Credit China), you mentioned in the video that the valuation of Shanghai Jifu was 2.4 billion dollars. So if the purchase price was just 856 rmb, it’s actually a heavy discount from the valuation.
As much as we want to put full trust on the listed company board, we still need to know that the people sitting on the board are being choose and paid by the shareholder of company. As much as, the person may be non-executive that does not handle daily operation but with his large shareholding, there is still influence in the way he make the call especially in Asian market where there are many grey area.
In the case of Shanghai Jifu, the purchase price of RMB856 is only 35% stake in the company which work out to be RMB 2.4 billion purchase price.
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