- The stock price of Nam Tai Property Inc (NYSE: NTP) fell by over 22% pre-market today. This is why it happened.
The stock price of Nam Tai Property Inc (NYSE: NTP) fell by over 22% pre-market today. Investors are responding negatively to a shareholder letter issued to shareholders.
The board of directors at the company provided an update about the path to securing total on-shore control of Nam Tai Property and its assets.
The board said that in recent weeks, Jiabiao Wang – whom the board believes to be a longtime ally of Kaisa Group Holdings Limited and whom the reconstituted Board of Directors has terminated from any role at Nam Tai – has obstructed an orderly handover of business assets in mainland China. And the Board has responded by actively engaging with local government officials to address Wang and Kaisa Group’s interference and uphold social stability. The board said It is clear that Wang and Kaisa Group’s attempts to delay the transfer of assets represent an unwelcomed development for local stakeholders. But the board said that they have the resources to attain control and place Nam Tai on what they believe will be a road to long-term value creation for the company’s shareholders, development partners, and valued employees in Shenzhen, Dongguan, Wuxi, Shanghai, and other cities.
At the special meeting of shareholders on November 30, 2021, approximately 95% of shareholders unaffiliated with Kaisa Group voted to approve the resolutions proposed by IsZo Capital Management LP (IsZo). Specifically, shareholders voted to remove 4 incumbent directors affiliated with Kaisa Group and to elect all 6 independent director candidates nominated by IsZo. The board believes the results of the Special Meeting indicated that a substantial majority of the company’s shareholders wanted to expel directors and officers with ties to Kaisa Group, including individuals who were deemed by the Eastern Caribbean Supreme Court to have acted for an improper purpose when initiating a now-voided $170 million private placement that involved Kaisa Group’s Greater Sail Limited.
The new Board held its first meeting on December 1, 2021, and took a number of steps last month, including:
— Appointing Chunhua Yu to replace Jiabiao Wang as the legal representative of the Company’s China subsidiaries;
— Removing existing officers and authorized signatories affiliated with Kaisa Group, and Wang from his role as chief executive officer;
— Appointing a new interim chief executive and a new interim chief financial officer;
— Retaining highly-qualified local and global advisors;
— Adopting a shareholder rights plan to protect against hostile investors acquiring control or control-like stakes without negotiating with the Board, and;
— Postponing the Special Meeting purportedly requisitioned by Kaisa Group’s affiliate Greater Sail Limited. The Company has been assessing the validity of the requisition after being informed that Deutsche Bank AG foreclosed on the nearly 24% equity position in the Company previously held by Kaisa Group’s affiliate Greater Sail Limited.
The board said that Wang is refusing to acknowledge his formal termination and facilitate an orderly handover of the on-shore business despite multiple visits and demands by the Board’s recently-appointed legal representative and the new management of the company. And Wang is currently preventing the new Board from accessing the company’s and its subsidiaries’ business licenses, corporate seals (also known as chops) and several bank accounts.
The board also believes Wang and Kaisa Group are also responsible for the following:
— Issuing false and misleading communications to local stakeholders in China via the Company’s website and other channels;
— Preventing the Board from communicating with the Company’s valued employees in China;
— Refusing to provide access to the Company’s books and records and systems;
— Purportedly engaging – without authorization – a Chinese law firm on behalf of the Company to assist with their efforts in obstructing the Board’s newly-appointed legal representative and management from accessing the Company, and;
— Threatening – without any basis – legal action against the Board’s recently-appointed legal representative for trying to fulfill the Board’s assignments and instructions.
The board is now engaging with China’s Administration for Industry and Commerce and other local government authorities to receive local recognition for the Board’s designated legal representative and obtain the company’s chop to facilitate a speedy transition. They have also reported Wang’s illegal activities to the Shenzhen Municipal Public Security Bureau, Gong Le Police Substation. To support this process, the board is working with the law firms of Global Law Firm (also known as GLO), JunHe LLP, and Quinn Emanuel Urquhart & Sullivan LLP. The legal advisors are helping them satisfy the necessary requirements to promptly rectify this situation. They are also assisting Nam Tai to claw back any assets or funds improperly distributed by Wang and any other Kaisa Group allies.
Despite attempts to deprive the new Board of access to capital, the company entered into an agreement with two sizable and long-term shareholders: IAT Insurance Group and IsZo to establish a $20 million debt facility. This took place after a process was run to secure affordable and shareholder-friendly terms for the company from a diverse group of potential capital providers. The facility, which is unsecured and includes competitive rates without equity dilution, can be upsized to $40 million. Proceeds will be used for ongoing working capital and other expenses.
In connection with the debt facility agreement, the Board agreed to amend the company’s shareholder rights plan to allow each of IAT and IsZo to acquire up to 24.9% of the company’s outstanding shares without violating the plan. But IAT and IsZo have agreed to vote any shareholdings above the 19.9% threshold in line with Institutional Shareholder Services recommendations on uncontested proposals.
Once the board obtains control of the chop and all of the company’s bank accounts, the board plans to pivot to hiring more local executives, building stronger relationships with suppliers and vendors, and realizing the intrinsic value of the company’s assets.
Plus the board is working towards obtaining access to various accounts in the near term, including a Hong Kong bank account with more than $80 million that they may have access to in the next several weeks. Plus the company intends to explore aggressive legal actions against parties who have harmed Nam Tai and put its stakeholders at risk.
Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.