Chinese bank China Renaissance reassures customers after owner’s disappearance
2023.02.21 01:17
Chinese bank China Renaissance reassures customers after owner’s disappearance
By Kristina Sobol
Budrigannews.com – People with knowledge of the situation said on Monday that the disappearance of a prominent Chinese dealmaker has made it difficult for his bank to reassure customers and employees and has raised investor concerns about “key man risk.”
After hitting a record low the previous session, China Renaissance Holdings’ shares dropped by as much as 5% on Monday after the investment bank said it couldn’t get in touch with Bao Fan, the company’s founder, chairman, and CEO.
In the Hong Kong market, the stock ended the day 0.1% higher, or 0.8 percent.
Although the circumstances surrounding Bao’s disappearance remain a mystery, his case is one of a number of high-profile executives in China who have vanished without providing any explanation during a comprehensive anti-corruption campaign led by President Xi Jinping.
In a stock exchange filing on Thursday, China Renaissance stated that it had no knowledge of any connection between Bao’s “unavailability” and its business and that its operations were continuing normally.
According to two sources and copies of their messages to staff that Reuters has seen, China Renaissance co-founder Kevin Xie and its head of investment banking, Wang Lixing, who are running the company in Bao’s absence, have asked employees not to believe or spread rumors.
“Everyone ought to have faith in the business at such an important time. Don’t worry if you fall. In his message that was posted on the company’s Wechat group on Friday, Wang stated that “it’s okay to encounter some difficulties in the short term.”
Authorities took Bao away earlier this month to assist in an investigation into a former colleague, Cong Lin, who was the company’s former president, according to two sources and some media reports.
Due to the sensitive nature of the situation, all of the sources with knowledge of it declined to be named.
A spokesperson for Beijing-based China Renaissance referred Reuters to its exchange filing from Thursday and declined to comment on specific details.
Xie and Wang didn’t quickly answer Reuters’ solicitations for input on Monday.
The public security bureau in Beijing also did not respond to a comment request. Wang Wenbin, a spokesperson for the Foreign Ministry, responded that he was unaware of the situation when asked on Friday during a daily news conference whether the banker had been detained.
The stock, which is listed in Hong Kong, rose as much as 3.5 percent early on Monday, but it eventually gave up all of those gains and dropped to as low as HK$6.82. On Friday, it fell to an all-time low of HK$5, but it later gained some ground and ended the day at HK$7.18, a decrease of 28%.
The company was founded in 2005 by Bao, who is also the controlling shareholder of China Renaissance. Its mission was to match capital-hungry startups with venture capitalists and private equity investors.
Later, it started offering services like underwriting, sales, and trading.
Bao was involved in tech mergers like the merger of ride-hailing companies Didi and Kuaidi, food delivery giants Meituan and Dianping, and travel platforms Ctrip and Qunar. Bao was well-connected in the business world.
Li Nan, a finance professor at Shanghai Jiaotong University, stated, “The key man risk with some Chinese companies was highlighted by what happened at China Renaissance.”
“A group of Chinese financial institutions rose quickly over the past few years on the efforts of one to two controllers,” despite the fact that this makes these businesses particularly susceptible to negative headlines indicating the controllers’ difficulties.
The term “key man risk” typically refers to the threat posed to a business by an excessive reliance on a small number of individuals for decision-making.
While it is not uncommon for authorities in China to detain business executives for a variety of reasons, Bao’s disappearance occurs in the midst of a broad regulatory crackdown on technology companies that has gone on for more than two years.
According to Propitious Research analyst Wium Malan, who writes on the Smartkarma platform, “This should once again remind foreign investors of the relative level of regulatory and governance risk associated with Chinese equities.”
