Visionox Returns
On the first of this month we noted that Chinese panel producer Visionox (002387.CH) trading was suspended from trading on the Shenzhen Stock Exchange for up to 5 days, as the company was notified by its largest shareholder, Tibet Zhihe Capital Management (pvt) that it would be transferring its shares to Visionox’s 2nd largest shareholder, the Kunshan Economic & Technological Development Zone, a city run management company that administers the special economic zone in Kunshan. Yesterday, the company confirmed the transaction and the stock reopened limit up, although the stock returned to pre-announcement levels today.
In typical fashion, Chinese trade press is spinning the transaction, which moves control of the company to a state-owned entity, as a positive event that brings together ‘the resources of Hefei and Kunshan…to further increase the production capacity and market share…leading to a win-win situation and the state-owned institutions.’ While that certainly could be the case, and Visionox is already building new capacity, our experience has been that state controlled display companies are more likely to be mismanaged, particularly as state officials have a relatively short tenure, and I many cases, a reversion to state ownership is an alternative strategy when company and market oriented funding is less than needed.
Visionox is in a good spot currently, as panel prices have been rising, but again the company is still dependent on local government subsidies for both expansion and operations, and we expect will continue to be as new capacity comes on line and begins depreciation. With competition increasing among small panel OLED vendors, we are not quite as sure that this transaction was one of strength, but we are certainly willing to give it a year to see if the new controlling shareholders can more the company further toward fiscal independence
In typical fashion, Chinese trade press is spinning the transaction, which moves control of the company to a state-owned entity, as a positive event that brings together ‘the resources of Hefei and Kunshan…to further increase the production capacity and market share…leading to a win-win situation and the state-owned institutions.’ While that certainly could be the case, and Visionox is already building new capacity, our experience has been that state controlled display companies are more likely to be mismanaged, particularly as state officials have a relatively short tenure, and I many cases, a reversion to state ownership is an alternative strategy when company and market oriented funding is less than needed.
Visionox is in a good spot currently, as panel prices have been rising, but again the company is still dependent on local government subsidies for both expansion and operations, and we expect will continue to be as new capacity comes on line and begins depreciation. With competition increasing among small panel OLED vendors, we are not quite as sure that this transaction was one of strength, but we are certainly willing to give it a year to see if the new controlling shareholders can more the company further toward fiscal independence
RSS Feed