Less than two years after Leo Ou Chen brought his online beauty products retailer to the US and investors protested about paying $22 per share, he is now offering less than a third of the initial public offering (IPO) price for a buyout.
The offer for Jumei International Holding Ltd (NYSE:JMEI) is the latest in a series of Chinese industries moving to exit the US equity market. Investors are currently angered by the low price benefiting management at the expense of shareholders.
On February 17, Chen announced that the company is making a non-binding offer of $7 in cash for every US depositary share. 54% of Jumei is owned by US shareholders, with 90% of the voting power.
The buyout group led by management will exploit loopholes that are meant to safeguard the interests of small stockholders if the cheap buyout effort turns out to become a success. Moreover, according to the minority group of investors, the buyout will undermine global confidence in other overseas-listed companies.
The offer is 27% above the average closing price over the past 10 sessions. However, it is 68% below the IPO of $22. Moreover, it is 11% below the average trading price over the past 90 trading days.
Jumei shares fell 33% in the US last year as its e-commerce platform lost to bigger rivals such as JD.Com Inc (NASDAQ:JD) and Alibaba Group Holding (NYSE:BABA). Last November, the company posted an adjusted loss of $0.80 in its earnings per share for the third quarter.
The stock has continued to decline, losing 36% as of February 16, the last trading session before the buyout proposal was disclosed. Since then, Jumei has recouped somewhat, surging 9.30% and ending the week at $6.38. The company’s market value has declined from a peak recorded in August, 2014 of $5.40 billion to just $913 million.
Management took advantage of the selloff, with Henry Guo, a Summit Researh Partners LLC analyst, believing that investors do not fully appreciate them.