E-House China Holdings Ltd. (EJ) surged the most in five years in New York after the real estate developer said its executives will buy new shares at a premium.
E-House, a Chinese provider of property agency services, jumped 30 percent to $3.98 in New York, the biggest gain since August 2007. The rally pared this year’s decline to 6.8 percent.
The Shanghai-based company’s management will purchase as many as 17.8 million shares, or 15 percent of stock outstanding, for $3.52 each, E-House said in a PRNewswire statement today. The executives will pay a 15 percent premium to the stock’s closing price of $3.06 on Dec. 7. The company said it may use the proceeds from the sale to repurchase shares at a later date.
“It shows that management is very positive about its business and views the stock as undervalued,” Ella Ji, an analyst at Oppenheimer & Co. in New York who rates the shares the equivalent of buy, said by phone. “It doesn’t happen very often that you’re seeing management using their own pocket of money to basically buy back shares.”
The $62.6 million purchase price will come from existing personal funds of the company’s most senior executives, with a possible combination of loans, Jessica Barist Cohen, a New York- based spokeswoman for E-House, said in an emailed response to questions.
E-House’s stock price has slumped this year as investors are cautious about the new government’s policies, Ji said. The government has raised down payment and mortgage requirements in its more than two-year effort to curb the property market. It also imposed a property tax for the first time in Shanghai and Chongqing and enacted home-purchase restrictions in about 40 cities. The government will “steadfastly” enforce property controls, Housing Minister Jiang Weixin said in Beijing last month.
“There’s still a lot of uncertainty regarding the market’s outlook with the new government,” Ji said. Xi Jinping replaced Hu Jintao as head of the ruling Communist Party last month.
E-House in November reduced its 2012 revenue goal to between $440 million and $460 million from an earlier estimate of $490 million to $510 million. The company cited an expectation for softer growth in fourth-quarter online advertising and a “challenging overall macroeconomic environment” in a statement.
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