Looking for a treatment for corporate governance for illness at Sinovac
China’s Sinovac Biotech Ltd. (NASDAQ: SVA) shares have been frozen since 2019 amid a shareholder dispute with a market capitalization of about $500 million
Sinovac has developed a hugely successful Covid vaccine, with over $10 billion in cash on its balance sheet, but investors have no dividends or liquidity
The current board is dodging the slate of competing directors supported by the founder/CEO.
The current board made an announcement that may have contributed to Grant Thornton’s resignation, preventing the filing of 2024 financial statements.
Accounting and governance experts said Corpgov Sinovac would be struggling to secure key auditors on its current board meeting.
Professor Charles Elson told Corpgov that Grant Thornton’s departure could potentially “sedge” as “as bad as it gets,” and that he is raising doubts about corporate governance under the current board of directors
The parties are expected to pay $55/share dividend, but Sinovac has a rather high value that requires investors to trade to resume to make a profit
Shareholders will decide whether to maintain or replace the board of directors at the July 8 meeting
Choosing a winner with biotech stock is hard enough to be on its own. Imagine investing in a small company that has become one of the biggest suppliers of covid vaccines in China. Question Current: Can a new board be better at devaluing?
Meet Sinovac Biotech Ltd. (SVA) of China, a NASDAQ registered company that has been caught up in shareholder disputes for many years. About a year before the first whispers that Covid circulated, stocks were frozen after a very rare outbreak. The so-called poison has been activatedcausing floods of new shares issued to some shareholders and halts on trading on the exchange.
The stock is listed, but has not been traded since early 2019. The following year, the company successfully developed a covid vaccine, which is widely used, especially in China, resulting in incredible economic success. The company has about $10.3 billion in cash. This amounts to about $140 per share, excluding the value allocated to the operating business, according to Saif Partners, the company’s largest shareholder with a 15% stake.
The company’s fate and its cash storage relies on the shareholder vote on July 8th to decide whether to replace the current board of directors. The Challenger Group, led by SAIF Partners, includes Sinovac founder and CEO Weidong Yin, Vivo Capital and Abantech Capital, with a 16% stake between the two investment companies. spokesmen for SAIF, Advantech and Vivo all called corpgov an existing statement and declined to comment further.
On the other side, two investment companies, along with Orbimed and Heng Ren Partners, are supporting the current board, along with Chairman Chiang Li and his 1Globe Capital Family Office. The company’s spokesman also directed the official statement that had already issued Corpgov.
Unfortunately, the current committee has not made much progress towards lifting its shares. Probably the most important short-term goal. On the contrary, the board may have contributed to the resignation of auditor Grant Thornton after it announced it was an “assessment of certain corporate actions taken by the former board.” In a letter to Sinovac, Grant Thornton said one reason for his resignation was that the board’s announcement introduced “uncertainty” and was unable to register it in the company’s 2024 financial statements.
On that side, the board argues that Grant Thornton’s departure is irrelevant to any of its actions. The submitted company cited a letter from Grant Thornton saying that “the resignation was not the result of a disagreement with the company or management.”
Regardless of which combination of factors led to Grant Thornton’s departure, the loss of a top-class company may mean that the company is unable to find another major accounting firm to register with that number, putting the company’s list even more at risk. “At this point, the board looks like it’s something,” an accounting expert who asked not to name it told Corpgov. “Other companies will be reluctant until it’s resolved.”
In fact, the current board may have lost wider credibility, according to Charles Elson, founding director of the Weinberg Corporate Governance Center at the University of Delaware. “It’s not much reflected in the boards that allow the auditor to resign. Worse, if the board causes a departure. That doesn’t seem to be the interest of the company or shareholders. It’s the fiduciary duty of the board,” Elson told Corpgov. “We need to ask whether it was done to support the company or whether it was done for the directors’ self-interest.”
Professor Elson noted that the company is working well with very successful drugs and that its business is not a concern for the time being. “It goes beyond performance issues and the governance issues they face,” he said.
The current board has been eroded by just four members after multiple departures. One of the people to note is Pengfei Li, who was sentenced to prison after embezzlement and government documents and seals as per his attempts to seize control of Sinovac’s subsidiary.
Interestingly, the Challenger Group is not trying to wipe out all existing directors. The slate actually includes Chiang Li, two of the four current board members. ChiangLi is a leading investor in the company along with Yuk Lam Lo, who was elected in a previous shareholder vote.
Resuming transactions may be the best outcome for shareholders seeking liquidity, but there is also discussion about a massive $55 dividend. It appears that both boards support its dividends and so on, but discussion about it didn’t begin until recently when Safe began to get upset. What’s more, even if the stocks stopped, there’s no reason they couldn’t pay dividends before the July meeting.
Finally, it is important to see Shinovac as a successful company. It’s far beyond this. The company has $440 million in 2023 and $121 million in the first half of 2024 (the business is very seasonal and its finances for the second half of 2024 have not yet been filed). The company’s cash value may be around $140 per share, but the real job of the new board is to focus on the company’s business rather than combat or litigation. Over the years, investors voting for board changes may ultimately enjoy the rewards of Shinovac’s fundamental success.
