New Comer—Merger on Fangzheng Tech

bonnie & Li Kening 

Several months after Yuxing Corp’s temporary aborted merger on Fangzheng Tech (600601), dust fell down. But some careful career men might notice that the price of Fangzheng Tech (600601) was stable (almost no change) in the long time bear slump of the indices (about –30%) from July to October. Within some times, from August 16th to 20th, September 3rd to 10th, and also the trade day after October 23, Fangzheng Tech (600601) had large bargain volumes. According to the candle chart, chips were so concentrated. 

( charts ) 


On Oct 25th, 2001, Gaoqing Corp, a newly founded electronics enterprise with Shanghai Communication University background, reported its share percentage of Fangzheng Tech (600601). 

Gaoqing’s report was still going on. Now, we cannot get to the bottom of it, but that will not hinder us to deduce by logical analysis: 

1、Being independent from each other, Gaoqing Corp and Fangzheng Group are not accomplices. 

Fangzheng Group has kept Fangzheng Tech directorate under control. What it should prevent is to be sued for by Yuxing Corp. If Fangzheng want to increase its shares of Fangzheng Tech (600601), even in some other companies’ name, it doesn’t need to increase shares up to the report limit. Contrarily, with no common interest, after Gaoqing report Fangzheng Tech (600601), Gaoqing Corp had a opposite interests with Fangzheng Group. 

2、Gaoqing probably has some relationships with Yuxing Corp or other shareholders who bought Fangzheng Tech (600601) in a low stock price. 

Before Gaoqing purchased Fangzheng Tech, the report made by Yuxing Corp had pushed Fangzheng Tech (600601)’s share price to a high level. According to a regulation of “Security Law”: “after reporting, shares hold by reporter, cannot be sold out in the following 6 months”. Restricted by this regulation, a reporter should always pay more attention to the purchasing price of the shares, which is the main factor affecting capital safety. But it seems that Gaoqing didn’t care about this. Gaoqing was found on Aug 30th, and it set up the security account on Sep 3rd. If there was not any special reasons, it would be better for Gaoqing Corp to wait for some months, until in the last month of the year, when the loans or capital could return to banks, the stock-market drops to a low level, and Yuxing Corp had sold some shares (the price will then be lower). However, Gaoqing, didn’t wait and hurried to purchase shares. Another strange sign is: from Nov 2nd to 8th, after Gaoqing reported, Gaoqing continued to buy 1120 thousand more shares of Fangzheng Tech (600601). At that time, showing on the daily chart, the trading volume was large, while the price fell down at the same time, so probably there were inter-trading actions. In brief, Gaoqing probably had some relationships or a tacit agreement with Yuxing Corp or other shareholders of Fangzheng Tech. Between them, there were inter-trading actions. 


( charts ) 


3、Gaoqing Corp paid more attention on report, and probably had some collaborators 

Furthermore, Gaoqing hurried to buy the stocks and to some degree didn’t care about the price, especially under the regulation “to transfer the shares within 6 months is not allowed”. Gaoqing’s action seems to show that it did not care about its purchase cost and the safety of this part of capital. By these two evidences, we could infer that the main purpose of Gaoqing Corp was to report. If Gaoqing Corp had operated on it’s own and without any collaborator, its shares would have not been safe, unless it had a long-time purchase plan. However, if Gaoqing had the long-time intention, it is doubtful that Gaoqing didn’t care about the cost and choose a right chance. A more reasonable explanation is that Gaoqing probably did have collaborators, which had purchased shares at a lower price. Then, Gaoqing reported openly, while its collaborators sold in darkness. Who are the collaborators? Might be Yuxing Corp, might be Zhaohua Tech (0866), also a list company, which had purchased many shares of Fangzheng Tech, and might be other companies or persons who hold shares. 

4、Gaoqing Corp and Yuxing Corp possibly had corporated. 

On Nov 14th, shares held by Shanghai Gaoqing Corp reached 6.4982%.0 Yuxing Corp and related 5 shareholders sold some shares and held 4.51％ of the total shares. Gaoqing and Yuxing combined with other shareholders held 11 hares in total，which far exceeded Fangzheng Group’s holding. We could say that Gaoqing and Yuxing Corp have common interests——entering the board，so there were relatively big possibility of corporation. If Gaoqing and Yuxing Corp made some kinds of tacit agreement and tried to enter the board together（or possibly with other shareholders’ corporation）and get part of controlling power in listed company. That situation would be beneficial to both parts. Guided by common interests, Gaoqing and Yuxing Corp would quite likely to make good corporation and fight together, unless there was complicate and unsolvable personnel conflict between two parts (such as the grudge between Zhu Jianqiuand Feng Peiran). 

Furthermore, most of the potential competitors would be afraid of one action of Fangzheng Group: taking back the usufruct of Fangzheng brand when competitors successfully merged the listed company. To some degree, Gaoqing Corp did not worry about this, because it depends on the Shanghai Communication University, so it had similar University Enterprises background with Fangzheng Group. But probably, Yuxing Corp was the most fearless one among all the competitors, because Zhu Weisha had the right-hand, Feng Peiran and his team, who knew well about Fangzheng Tech’s operations. This obvious advantage meant a potential cooperate value. 


In brief, the reason that highlight the merger focused on Fangzheng Tech (600601) in 2001 lies on that Fangzhegn Tech ‘s high quality asset and a current stock structure, which were different from most other listed companies and beneficial to market operations. 

The Gaoqing Corp’s merger is still going on. No doubt, there will be many wonderful scenes in the near future. And no doubt, in the incessant merger and anti-merger practices, our stock market and our enterprises will be more mature and attractive. 


published by China Economy&Trade