Gome Electrical Appliances Holding Ltd. fell the most in a week in Hong Kong trading after a newspaper reported its former chairman as saying the company’s targets are unachievable and the stock has no prospects.
Gome said it will take “appropriate steps” after the 21st Century Business Herald reported Chen Xiao as saying the company is overcharging home appliance suppliers for admission fees and its plan for new store openings is impossible to reach. The stock has “no prospect” and many institutional investors have pulled out, Chen was quoted as saying.
Shares of the Beijing-based electronics retailer fell as much as 3.2 percent, and traded 1.8 percent lower at HK$2.76 as of 1:35 p.m. in Hong Kong, headed for the biggest decline since May 4. The benchmark Hang Seng Index (HSI) rose 0.4 percent.
“The company would not tolerate Mr. Chen’s behavior as expressed in the article and any other false or misleading news reporting about the company,” Zhang Dazhong, Gome’s current chairman, said in a statement to the Hong Kong stock exchange today. Gome “would take appropriate steps to protect the company’s interests,” the statement said, without specifying what it might do.
Chen stepped down as chairman in March after a boardroom battle. Jailed billionaire founder Huang Guangyu had fought for control with Gome shareholders including Bain Capital LLC, saying he disagreed with the slower rate of store openings under Chen, whom the private-equity fund had supported.
Gome “does not agree” with Chen’s views, which don’t represent the position of the company, it said in the exchange statement. Chen didn’t answer calls to his mobile phone or respond to an e-mail listed on his microblog.
The electronics retailer posted the fastest profit growth in four years in 2010, as net income rose 39 percent to 1.96 billion yuan ($299 million). The company said in March it will concentrate on opening stores in key regions, particularly megastores and flagship outlets, and speed up expansion in so- called second-tier markets.
Same-store sales, which show how stores are faring without taking into account the impact of newly opened outlets, rose 22 percent last year, according to the company. Gome closed 39 underperforming stores, opened 139 new stores and remodeled existing stores in the period, it said in March.
Gome’s shares have risen 18 percent in the past year, trailing the 29 percent gain by rival Suning Appliance Co., which trades in Shenzhen.
Chen owns a 1.2 percent stake in Gome, according to data compiled by Bloomberg. Huang, also known as Wong Kwong Yu, holds 31 percent and privately owns the Gome brand and about 400 stores. He is currently serving 14 years in prison for bribery, insider trading and illegally buying foreign currency.
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