Posted on March 7, 2009 - by Level13

Beauty China turns ugly duckling

Photo by crackers93

To say that it has been a roller coaster ride for the shareholders of Beauty China (BC) in the past 2 days is a gross understatement. No retail investor could have been prepared for the extreme volatility that we have witnessed on BC’s share price. On the morning of 2nd March, BC called for a trading halt pending announcement. BC closed at $0.37 on the previous Friday (27th Feb). The much-awaited announcement that was made on Tuesday noon disclosed that the founder, Mr Wong, was in discussion with some parties regarding the sale of his 38.7% stake.

At first glance, it looks like good news for the shareholders as some parties are interested in acquiring a stake in BC, which was previously a market darling before this downturn. However, it occurred to me that assuming the party was to successfully take control of Mr Wong’s 38.7% stake, it would also need to make a general takeover offer for all shares it does not own at the similar price it paid. If the ultimate intention of the other party is to takeover the whole company, then it seems odd that only Mr Wong alone is in negotiations and not the whole board of directors. Read more…

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