Ambow Falls on Resignations as ADRs Drop: China Overnight
(Corrects to remove reference to first mainland Chinese default in 16th paragraph.)
Ambow Education Holding Ltd. (AMBO) sank the most in two weeks in New York, leading declines in Chinese equities traded in the U.S., as directors resigned citing disagreement with the education company’s management.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. fell 0.7 percent to 91.14 yesterday, the lowest level since November. Ambow, which said last week it received a buyout offer, tumbled as much as 23 percent. Yingli Green Energy Holding Co. dropped the most in five months and LDK Solar Co. plunged after an industry official said China may abolish some subsidy programs. New Oriental Education & Technology Group Inc. (EDU) jumped a second day.
JPMorgan Chase & Co. downgraded Chinese equities to underweight on concern growth will slow as inflation accelerates. Ambow, a Beijing-based tutoring company, said yesterday that three board members resigned, two days after Baring Private Equity Asia Ltd. proposed taking the company private at a 44.5 percent premium. In his resignation letter filed by Ambow, board member Daniel Phillips said the audit committee had “fundamental and irreconcilable” differences with management.
“These resignations would put that offer in some kind of jeopardy,” Trace Urdan, a senior analyst at Wells Fargo & Co., who suspended coverage of Ambow Feb. 12, said by phone from San Francisco yesterday. “Baring can’t have perfect insider information even it is very close to the company. More importantly, it probably scares off anybody else from making a competitive offer.”
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., slid 1.7 percent to $36.79 in New York, the lowest close since Nov. 21. The Standard & Poor’s 500 Index (SPX) dropped 0.6 percent to 1,552.10, retreating the most in three weeks.
Ambow’s American depositary receipts tumbled 16 percent to $1.30, the biggest one-day slump since Feb. 27. The company’s ADRs have lost 83 percent over the past year. Trading volume was seven times the daily average over the past three months, data compiled by Bloomberg showed.
Ambow surged 53 percent March 15 after saying Baring’s Asia Private Equity Fund V LP offered to take it private for $1.46 per ADR. The company received resignation letters from three board members, including Phillips, Mark Harris and Lisa Lo, it said in a statement yesterday.
Phillips, chairman of Ambow’s audit committee, said in his letter that the committee has “fundamental and irreconcilable” differences with the company’s senior management over processes required to complete an ongoing investigation and issues concerning internal controls.
Ambow said July 5 that it would conduct an internal probe into allegations by a former employee of financial impropriety and wrongful conduct in connection with the purchase of a training school in 2008. The company said in a filing that day that it wouldn’t comment until the probe was complete.
Mandy Li, Ambow’s Beijing-based spokeswoman, didn’t immediately reply to an e-mail seeking comment outside business hours.
Harris, another audit committee member, said his resignation was caused by the body’s inability to make changes he believed to be “appropriate and necessary,” including the removal of Chief Executive Officer Jin Huang.
Yingli (YGE), a solar technology manufacturer based in Baoding, China, dropped 6.9 percent to $2.30, the steepest daily loss since October. LDK Solar, the second-biggest solar wafer maker globally, fell 11 percent to $1.27 in the biggest decline in three days.
China’s new policy for solar energy would keep in place aid for plants owned by the final user of the power, while trimming back subsidies established to start utility-scale projects, Meng Xiangan, vice chairman of the China Renewable Energy Society in Beijing, said in an interview yesterday. His organization acts as a liaison between the government and industry.
LDK board member Liangbao Zhu resigned March 17 “for personal reasons,” the company said in a PRNewswire statement yesterday.
Suntech Power Holdings Co. (STP), the world’s biggest solar-panel maker in 2011, slipped 8.4 percent to 64 cents in New York.
The manufacturer, based in Wuxi, China, failed to repay $541 million of notes due March 15, breaching terms of other outstanding loans.
Suntech obtained an agreement from holders of 63 percent of the notes to delay exercising their rights until May 15, allowing executives to press ahead with restructuring payments. Some noteholders not involved in those talks are organizing a rival group and have threatened to sue.
New Oriental, the biggest private education provider in China, surged 8 percent to $17.31 in U.S. trading for a two-day advance of 17 percent. 86Research Ltd. analysts led by C. Ming Zhao said in a March 15 note that the company may also become a buyout target after the offer for Ambow.
The company is “well on track” to deliver “solid” results for the quarter ended in February, Oppenheimer & co. analyst Ella Ji said in a note dated March 17, citing its school checks. She reiterated an outperform rating, equivalent to buy, citing an improved outlook and attractive valuation.
The Hang Seng China Enterprises Index (HSCEI) sank 2 percent to 10,794.70 yesterday, the lowest level in more than three months. The Shanghai Composite Index (SHCOMP) of domestic Chinese shares lost 1.7 percent to this year’s low of 2,240.02.
Thirty-day volatility on the China-US gauge slid to 13.7 yesterday, the lowest level since May 2011, and compared with a three-month average of 16.6, according to data compiled by Bloomberg.
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