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    How China’s tech bosses cashed out at the right time

    In China, there are no clear signs of selling as when Chinese President Xi Jinping personally began to attack the industry.

    So when Xi complained in March that relentless homeschooling was a “stubborn illness” that puts undue pressure on Chinese children and their parents, at least two Chinese tutoring companies. The head of the company started selling stocks in New York.

    In one of the previously unreported transactions, a paper company holding a stake in GSX Techedu executives, whose market capitalization in New York was about $ 24 billion at the time, was 100 million just three days after Xi spoke. We have begun selling $ 19 million worth of shares.

    The sale is one of the hundreds of records reviewed by the Financial Times, one of the first to see when and how executives of New York-listed China’s largest tech company trade shares. It is one.

    In public, GSX CEO Larry Chen, who appears to have nothing to do with the shell company he sold, promised to buy $ 50 million in stake with his own money at the end of March. Showed confidence in his business.

    But one close to GSX said its leaders knew at the time of trade that Beijing was considering stricter regulations on the industry.

    By July, the Chinese government had banned profits across the sector and plunged stock prices of all major tutoring companies. Today, a block of GSX shares for sale in March would be worth just $ 4 million. Chen doesn’t seem to have fulfilled his $ 50 million pledge yet.

    GSX (rebranded as Gaotu Techedu) declined to comment on the sale of shares, saying that all shares purchased by Chen will be included in the public documents. So far nothing has happened.

    An executive at another Chinese education company also monetized its New York-listed stock in preparation for a profit ban in July.

    The couple team, which co-founded the online English tutor platform 51Talk, began selling shares on April 1st and sold blocks of shares almost every other day until the end of June. Their sales were half of the stock traded in a few days. By the time Beijing announced the new regulation, they had cashed $ 4.3 million. 51Talk did not respond to repeated requests for comments.

    Documents reviewed by FT show dozens of other timely sales by Chinese executives. There is no evidence of insider trading, but many of the transactions preceded the release of regulatory measures and disappointing earnings reports.

    Some executives seem to have been at the top of the market. Ten executives and directors of VIPshop, an online discount shopping site, sold about $ 527 million in shares in March. That’s almost three-quarters of all the shares sold in the last 18 months. The collapse of Archegos Capital Management caused the sale of its shares.. Currently, stock prices are down 70% from March levels. VIPshop declined to comment.

    An interactive graphic snapshot is displayed. This may be due to being offline or having JavaScript disabled in your browser.

    Transactions by Chinese executives have received little attention as they are bound by different reporting rules by the US Securities and Exchange Commission, which claims that US executives must report the sale of shares within two days. In Hong Kong, directors must report within 3 days, but executives of companies listed in mainland China must notify 15 days before selling.

    In contrast, executives of foreign companies listed on the United States tend to instead report the total number of shares they hold once or twice a year, or not at all, depending on the size of the shares.Companies, including online shopping giant Alibaba, are using the US list to get tax exemptions in Hong Kong, with additional disclosure “Excessive burden” About the “corporate insider”.

    In the United States, under Rule 144, foreign executives are required to report when they will begin planning to sell restricted shares by uploading or mailing the document to EDGAR, the primary disclosure system.

    Almost all of them have historically been submitted by mail, and the SEC granted access to the documents in the reading room in Washington, DC, but did not upload them to EDGAR. Since April last year, the SEC has also accepted email notifications, but has not uploaded them to EDGAR either. Private sectors have digitized filings for sale to institutional investors and banks.

    “This system exists not because some people say that foreigners don’t need to report insider trading, but because they don’t recognize the asymmetry of disclosure rules,” said Daniel Taylor, corporate finance. Stated. Wharton School expert.

    Alibaba Executive Share Estimated Sales

    “When I tell people that the transaction has been reported but is being mailed to the SEC, few people believe me unless I show them the actual mail,” he added.

    The SEC is considering changing the rules to require all forms 144 to be submitted to EDGAR.

    Some Chinese tech executives also use shell companies to hide their identities. One of Alibaba’s top executives has begun plans to sell hundreds of millions of dollars worth of shares using a Bahamian shell company called Sky Scraper Enterprises Ltd.

    Plans have begun to sell $ 155 million in shares in a few weeks, centered on Alibaba’s sister company Ant Group’s blockbuster IPO. The plan stumbled after Beijing intervened to thwart the IPO.

    I couldn’t prove the identity of the executive, but there were some clues. He or she has won an ever-increasing share package over the last decade and is one of the company’s most rewarding leaders. FT has identified various shell companies used in almost all of Alibaba’s top brass, with the exception of CEO Daniel Zhang and Ant’s chairman Eric Jing.

    “We have strict policies and procedures in place to ensure that all employees, especially directors and officers, are in full compliance with all applicable securities laws,” Alibaba said. rice field. A spokeswoman added that all executive officers must sell their shares according to a passive plan with a 30-day or 60-day cooling-off period before the transaction can be executed automatically. Ant declined to comment.

    The planned trading scheme aims to prevent seemingly illegal insider trading, but Taylor said Conducted research It indicates the possibility of misuse. Some Chinese executives are worried that they could have traded in a timely manner under the plans adopted at the end of the company’s accounting quarter, recognizing earnings for the upcoming quarter. Was announced.

    Planned sales of Alibaba insiders around AntIPO

    In 2016 and 2017, New York-listed Chief Executive Officers Cheetah Mobile and Tarena International began selling $ 31 million and $ 10 million worth of shares in a few weeks, reporting quarterly results. , Lowered stock prices by 30% and 24%. Each cent. Both men had adopted a trading plan at the end of the quarter.

    “This is a big red flag. The fact that these plans were adopted at the end of the quarter and started trading before the earnings announcement,” said Taylor.

    Cheetah Mobile did not respond to repeated requests for comments. Tarena declined to comment.

    How China’s tech bosses cashed out at the right time Source link How China’s tech bosses cashed out at the right time

    The post How China’s tech bosses cashed out at the right time appeared first on California News Times.

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