Fosun stock tumbles over rumors of chairman disappearance—again

Fosun group shared on social media pictures of its chairman Guo Guangchang speaking at an event on Thursday morning Beijing time, refuting rumors that he had gone missing. (Weibo @Fosungroup)

Fosun Chairman Guo Guangchang is not missing, the Chinese conglomerate said, as it tried to refute online rumors that sent subsidiary Fosun Pharma’s shares down more than 8% in Shanghai Thursday morning.

It’s déjà vu, as this is the second time in two years that Guo’s whereabouts have spooked investors. Only last time, in December 2015, Guo did go AWOL briefly, and was later known to be “assisting” an investigation into a fallen Shanghai government official instead of being the subject of the investigation as the market had previously suspected.

Fosun has never entirely rid itself of gossip that it might be the target of Beijing’s recent crackdown on corruptions, but this time, it soon moved to quash the rumor. The company published a clarification statement (Chinese, PDF) through the Shanghai Stock Exchange and via social media, stating that Guo was in the city of Xi’an, Shaanxi province, attending an international entrepreneurs conference.

Although the announcement did help Fosun’s stock recover some lost territories afterward around noon, it didn’t restore it in full. Fosun Pharma’s stock was down about 3.67% upon market closing.

The captain-gone-missing rumor was only the most recent episode of problems at Fosun. Just a few days ago, China’s banking regulator ordered investigations into “systemic risks” from some of China’s largest companies and poster children of foreign purchases. Fosun, together with Wanda Group, known for real estate and its majority stake in AMC Theatres, and Anbang Insurance Group, famous for its purchase of Waldorf Astoria New York and failed attempt to acquire Starwood, is among those under scrutiny. Fosun Pharma’s stock dropped 8% on June 22 upon rumors that banks were selling its bonds.

As for Fosun Pharma, it announced last July a deal to buy a roughly 86% stake in Indian injectables specialist Gland Pharma for about $1.26 billion. Founded in 1978, Gland’s manufacturing facility was the first U.S. FDA-approved injectables provider in India, and the U.S. and European markets are its major sources of revenues, Fosun said in a release.

The transaction has received approval from India’s Foreign Investment Promotion Board in late March but still awaits other green lights, including that from the Indian cabinet. Once finalized, the amount of the investment will surpass Sanpower’s recent $820 million to buy Dendreon from Valeant and will probably become the largest Chinese pharma foreign M&A.

Besides Guo, some major management changes at both Fosun Pharma and at the group level are also affecting the market’s confidence in the company’s stability. In late March, Liang Xinjun, a co-founder of the Fosun group, stepped down as CEO due to health reasons, and Song Jinsong, SVP of Fosun Pharma, also resigned due to personal reasons; and on July 3, Fosun Pharma announced the departure of a VP.

In what seems as a demonstration of confidence in Fosun Pharma, Fosun Group announced on Friday local time that the parent has bought about 1.78 million shares of Fosun Pharma's Shanghai stock for about $54 million Chinese yuan (about $7.94 million).