Do Hedge Funds Have the Chops to Win in China?
Taking control of a company without possession of the official stamp, as IsZo has learned, can amount to a hostage negotiation with the previous management.
Long tradition: A white jade seal carved in 1796 to celebrate the Emperor Qianlong's abdication.
Photographer: Mike Clarke/AFP/Getty
They’ve been around for thousands of years but they’re still tripping up foreign investors in China. Company chops are the carved seals that, when used with a red inkpad to stamp documents, confer legitimacy on corporate actions. Investors accustomed to the norms of Western business may think they control the company when they hold a majority of the shares. Nuh-uh. The chops are the keys to the kingdom. He or she who possesses them is the master.
The latest exhibit in a catalog of corporate misadventures featuring company chops is Nam Tai Property Inc. New York-based hedge fund IsZo Capital Management LP succeeded late last year in rallying foreign shareholders to wrest control of Nam Tai’s board from another Chinese developer, Kaisa Group Holdings Ltd., which it had accused of mismanaging the Shenzhen-based and US-listed company.