Fosun International shares fall amid scrutiny of Guo Guangchang's empire.
Guo Guangchang's empire under increased scrutiny after Fosun shares lose value.
Fosun International's Hong Kong-listed shares close at lowest point since December 2012.
Since the announcement of the partial divestment of a core Chinese pharmaceutical unit, Fosun International's Hong Kong-listed shares have lost nearly one-fifth of their value this month, putting the nearly $40bn of debt amassed by Chinese billionaire Guo Guangchang under increased scrutiny. The Shanghai-based tycoon had made aggressive acquisitions to build an expansive business empire that includes English football club Wolverhampton Wanderers, Portugal’s biggest bank Millennium BCP and French resort group Club Med. But Fosun has been subject to increasing scrutiny from rating agencies and investors over its debt in the past several months. The Financial Times reported in July that Moody’s estimated Fosun’s total consolidated debt stands at Rmb260bn ($38bn), though the company maintained at the time it was in a “sound and healthy” financial position. Market sentiment deteriorated this week after Bloomberg reported that Chinese securities regulators asked some large lenders and state-owned companies to examine their business exposure to Fosun. Guo said on Thursday that Fosun will file a lawsuit against Bloomberg, denying that banking regulators had made such an instruction. In a separate statement to the FT on Wednesday, the group downplayed the checks from the State-owned Assets Supervision and Administration Commission as “routine information collection work by the Beijing SASAC system, without any specificity”. Fosun also said that Zhu Wenkui, its vice-president and secretary of its in-house Chinese Communist party committee, met officials from the Beijing SASAC on Wednesday.
Guo Guangchang's empire includes English football club Wolverhampton Wanderers, Portugal's biggest bank Millennium BCP, and French resort group Club Med.
Guo Guangchang has been subject to increasing scrutiny from rating agencies and investors over his empire's debt.
Guo Guangchang, also known as "China's Warren Buffett," has been under increased scrutiny from rating agencies and investors over the past several months, due to the large amount of debt his business empire has amassed. As of July 2018, Moody's estimated that Fosun International, one of Guo's holding companies, had a total consolidated debt of Rmb260bn (US$38bn). This is a significant increase from the Rmb180bn (US$26bn) in debt that Fosun reported just one year earlier.
The increase in debt has caused some concern among investors and rating agencies about the company's ability to repay its loans. In particular, Fosun's heavy reliance on short-term borrowing to finance its acquisitions has raised red flags. Short-term borrowing is typically more expensive than long-term borrowing, and it can be more difficult to refinance when the time comes.
In addition, Fosun has been criticized for using aggressive accounting methods to mask the true extent of its indebtedness. For example, in 2017 the company used "operating leases" to move Rmb50bn (US$7.3bn) of debt off its balance sheet. This allowed Fosun to avoid classification as a highly leveraged company by Chinese regulators.
Fosun International's total consolidated debt estimated at Rmb260bn ($38bn) by Moody's.
Fosun International is a Hong Kong-listed conglomerate controlled by Chinese billionaire Guo Guangchang. The company has interests in insurance, pharmaceuticals, real estate, steelmaking, mining, and other businesses.
Fosun International was founded in 1992 and listed on the Hong Kong Stock Exchange in 2007. Since then, the company has made a number of high-profile acquisitions, including English football club Wolverhampton Wanderers, Portugal's biggest bank Millennium BCP, and French resort group Club Med.
Fosun International is majority-owned by Guo Guangchang and his family members through a series of holding companies based in China and overseas jurisdictions such as the British Virgin Islands.
Chinese securities regulators ask large lenders and state-owned companies to examine their business exposure to Fosun.
Guo Guangchang denies that banking regulators made such an instruction.
Fosun group downplays checks from State-owned Assets Supervision and Administration Commission.
On Thursday, Guo Guangchang denied Bloomberg's report that Chinese securities regulators had asked banks and state-owned companies to examine their business exposure to Fosun. In a statement to the Financial Times, the Fosun group downplayed the checks from the State-owned Assets Supervision and Administration Commission as "routine information collection work by the Beijing SASAC system, without any specificity."
Scrutiny of Guo Guangchang's business empire comes amid strains between President Xi Jinping's government and China's business leaders.
Guo Guangchang writes on Weibo that he has returned to Shanghai after a months-long tour of nearly 40 cities in more than 20 countries.
In a rare public post on Chinese social media platform Weibo, Guo wrote on Tuesday he had returned to Shanghai after a months-long tour of nearly 40 cities in more than 20 countries. Despite the fact that more than half of the company’s assets and staff are stationed overseas, “Fosun is a company rooted in China, and China will forever be the citadel of Fosun,” Guo said.
Fosun entities disclose intention to pare back holdings in cornerstone listed healthcare unit Shanghai Fosun Pharmaceutical.
Earlier this month, Fosun entities disclosed their intention to pare back holdings in cornerstone listed healthcare unit Shanghai Fosun Pharmaceutical by 3 per cent. The unit’s stock price in Shanghai has since fallen 16 per cent by Wednesday’s close.