On January 28, 2016, after eight years of development, China’s Food and Drug Administration approved Sinovac’s Hand Foot & Mouth (HFM) vaccine EV71. The very next day, company insiders announced a plan to take the company private at only a 6.6 premium to the previous day’s closing price.
Heng Ren points out that the buyout price the insiders are offering is 17.9 percent below the stock's 2014 high and represents only about 57 percent of Sinovac’s true value.
“The Insiders’ attempt to begin the removal of financial partners only one business day after the go-ahead for the commercialization of the all-important EV71 vaccine, and avoid sharing the upside with loyal shareholders, is a sobering look into this leadership’s character and ethics,” Heng Ren writes.
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Heng Ren makes the following four demands of Sinovac management:
- 1. Raise the buyout offer of $6.18/ADS closer to Heng Ren’s estimated $10.84/ADS value estimates.
- 2. Demonstrate loyalty to the shareholders that funded the costly development of EV71.
- 3. Remove the “poison pill” defense that requires that any outside buyer of Sinovac’s stock to pay $60 per preferred share rather than the $30 per share.
- 4. Avoid the reputational damage that the company would sustain if it takes advantage of shareholders by taking the company private at a lowball price.
Even with the announcement of the insider buyout bid, shares of Sinovac are up just 3.1 percent in 2016 and 5.7 percent in the past year.
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