Nam Tai Property: Stock Rallies On Important Progress In China (NTPIF)

Be aware:

I’ve coated Nam Tai Property Inc. (OTC:NTPIF) beforehand, so buyers ought to view this as an replace to my earlier articles on the corporate.

For the reason that starting of 2021, shares of Shenzhen-based actual property developer Nam Tai Property Inc. or “Nam Tai” have skilled a wild journey after a successful activist investor marketing campaign appeared to have freed the corporate from the clutches of a lot bigger peer Kaisa Group (“Kaisa”).

After rallying by greater than 600% at its peak in June 2021, the downturn within the Chinese language actual property market began to influence the inventory value within the second half of 2021.

Issues received worse after Deutsche Financial institution AG (DB) foreclosed on ailing Kaisa Group’s 23.9% stake within the firm in December 2021.

In January 2022, shares took one other hit after the corporate alleged its former CEO, Jiabiao Wang, having “obstructed an orderly handover of enterprise property in mainland China” by stopping the brand new board from accessing the corporate’s and its subsidiaries’ enterprise licenses, company seals (often known as chops) and financial institution accounts

The difficulty required the brand new board of administrators to safe as much as $40 million in emergency financing from a few of its largest shareholders at the moment, activist investor IsZo Capital Administration or “IsZo” (16.8%) and IAT Insurance coverage Group or “IAT” (14.7%), an organization managed by billionaire Peter Kellogg, additionally a long-term shareholder (3.63%) and non-executive director of Nam Tai.

In April 2022, activist investor Oasis Administration acquired roughly 20% of the corporate’s shares from Deutsche Financial institution AG and stated to be in “lively dialogue with all events for a mutually helpful decision“.

In Might 2022, the NYSE halted buying and selling within the firm’s frequent shares on account of “regulatory considerations concerning the Firm’s lack of direct management over the Firm’s chops“.

In November 2022, the NYSE announced its determination to delist the corporate’s frequent shares on account of ongoing regulatory submitting delinquencies.

Shortly thereafter, the shares commenced buying and selling on the OTC Knowledgeable Market beneath the image OTC:NTPIF.

Please notice that the Knowledgeable Market represents the bottom tier within the OTC markets with retail buyers being precluded from participation.

Buying and selling is normally restricted to broker-dealers, establishments and different refined buyers.

After a six-month buying and selling halt, shares completed their first week on the OTC Knowledgeable Market at $2.25, down virtually 50% from the final closing value on the NYSE in Might and stayed at depressed ranges till final month.

On the finish of March, the corporate provided a litigation replace and disclosed that obtainable money available was down to simply $2.2 million.

In early April, Nam Tai Property disclosed a extremely favorable arbitration award (emphasis added by creator):

As beforehand disclosed, in October 2020, the Firm entered right into a securities buy settlement (the “2020 PIPE”) with Larger Sail Ltd. (“GSL”), an entirely owned subsidiary of Kaisa Group Holdings Restricted, by way of which the Firm issued, and GSL bought, 16,051,219 shares (…) for US $146.9 million. (…)

That very same month in October 2020, one of many Firm’s shareholders, IsZo Capital LP (“IsZo”), requested the British Virgin Islands Industrial Courtroom within the Jap Caribbean Supreme Courtroom (the “BVI Courtroom”) to put aside the 2020 PIPE. In March 2021, the BVI Courtroom voided the 2020 PIPE.

Instantly thereafter, in March 2021, GSL initiated a global arbitration towards the Firm asking that the Firm be ordered to reimburse GSL the US $146.9 million that GSL paid beneath the now void 2020 PIPE. The proceeds from the 2020 PIPE are actually held in an account at Credit score Suisse (the “CS Account”), the place US $89 million of the unique proceeds stay. (…)

On April 6, 2023, the arbitrator issued a partial award, dismissing all of GSL’s claims towards the Firm. The arbitrator additionally accepted the Firm’s counterclaims towards GSL for prices expended on the 2020 PIPE, and the authorized prices regarding IsZo’s proceedings to void the 2020 PIPE. The arbitrator reserved for his remaining award quantification of the Firm’s damages, prices, and curiosity. The arbitration was seated in Hong Kong and topic to the legal guidelines of Hong Kong. The Firm doesn’t but have entry to the funds within the CS Account and can’t precisely estimate at the moment when will probably be in a position to entry such funds.

Sadly, the authorized battle with Kaisa / Larger Sail is prone to continue in the intervening time:

On April 20, 2023, GSL initiated proceedings earlier than the Hong Kong Courtroom to have the arbitrator’s partial award put aside.

Additional, on April 20, 2023, GSL filed two extra purposes earlier than the Hong Kong Courtroom. The primary software requested that the Hong Kong Courtroom preserve its April 29, 2021 order implementing the arbitrator’s interim preservation order. The second software requested that the Hong Kong Courtroom grant a brand new freezing order stopping the Firm from dissipating its property, together with quantities held by Triumph in its Hong Kong Credit score Suisse account, till GSL’s aforementioned software to put aside the arbitrator’s award is decided.

The corporate additionally raised an mixture $15.4 million in new capital from the sale of roughly 8.8 million shares to 4 massive shareholders:

Nam Tai issued one other 3.3 million shares to amend phrases and cut back excellent principal beneath promissory notes held by IAT and IsZo.

In consequence, excellent shares have elevated from 39.2 million disclosed within the firm’s 2020 annual report on type 20-F to 55.6 million as of at this time.

Final week, the corporate announced a significant step in direction of gaining management of Nam Tai’s mainland China property (emphasis added by creator):

Nam Tai Property Inc. (…) at this time introduced that its reconstituted Board of Administrators and new administration group have lawfully obtained the company chops and enterprise licenses for all the Firm’s subsidiaries within the Individuals’s Republic of China. (…)

The Firm is now within the means of registering its Chief Govt Officer, Yu Chunhua, because the Authorized Consultant for its subsidiaries with the Administration for Market Regulation of the PRC.

Mr. Yu commented:

“Our reconstituted Board and new management group are happy to have obtained the company chops and enterprise licenses in a lawful, orderly method. We are actually in a greater place to construct a broader native presence, make investments extra in our workers and uphold native stability. We look ahead to working with all native constituents, together with policymakers, to enact a easy transition with the previous administration group and discover long-term funding alternatives in Shenzhen and elsewhere throughout mainland China.”

The Firm is working to promptly register Mr. Yu because the Authorized Consultant for its subsidiaries with the Administration for Market Regulation, however it can not make assurances as to how lengthy it would take to safe registration. Sadly, Kaisa Group Holdings Restricted is constant its multi-year marketing campaign to destabilize native stability and illegally seize management of Nam Tai’s property. The registration of Mr. Yu because the Authorized Consultant is necessary to acquire entry to all financial institution accounts, books and information, and assets of the Firm’s subsidiaries.

To this point, the corporate has not been successful to register its new CEO for all of its on-shore subsidiaries and accordingly has but to achieve full management of those entities together with their respective books and information.

Backside Line

Whereas necessary progress has been revamped the previous couple of months, Nam Tai Property Inc. continues to struggle a bunch of authorized battles with no near-term finish in sight.

Please notice that litigation will not be restricted to Kaisa subsidiaries and associates as the corporate has additionally been served with various materials claims associated to building contracts entered in earlier years.

Buyers ought to hope for the corporate to achieve adequate entry to its mainland China financial institution accounts as quickly as doable to be able to keep away from extra dilution going ahead.

Please notice that retail buyers are prone to stay precluded from buying and selling the corporate’s shares in the intervening time as transferring to a better OTC phase or re-list on the NYSE would require Nam Tai Property Inc. to turn out to be present in its regulatory filings which isn’t going to occur anytime quickly.

Editor’s Be aware: This text discusses a number of securities that don’t commerce on a significant U.S. change. Please concentrate on the dangers related to these shares.