Wu Yajun of Longfor properties saw the shares of her company drop because of her divorce, but she is certainly not the first. Financial analyst Wei Gu of Reuters’ Breakingviews looks at divorce as a risk factor for listed companies, or their IPO’s, especially in China.
Longfor is not the first Chinese company to be shaken by a marital rift. The ex-wife of Tudou founder Gary Wang got a Shanghai court to freeze his entire stake. This case held up the internet video site’s New York initial public offering for half a year. Finally listed in 2011, its shares struggled, and the company was taken over by larger rival Youku a year later. The founder of Shenzhen-listed public relations company Blue Focus barely clung to his own role as the top shareholder after giving almost half of his stake to his ex-wife in 2011.
Divorces are costly for rich people everywhere in the world, but losing half a business empire is less common. What makes China different is a large number of companies still in founders’ hands, and the common presence of husband and wife teams. Prenuptial agreements are rare, probably because few founders dreamed of getting so rich so quickly, while much of their wealth is still tied up in shares. Where there’s no prior agreement, Chinese courts tend to split divorcing couples’ wealth in half.
Almost 3 million couples parted ways in 2011, up 7 percent from a year earlier, official figures show. As divorce rates rise in China, investors should note that entrepreneurs’ private wobbles can have public consequences.
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- Wei Gu joins the China Speakers Bureau (chinaspeakersbureau.info)