Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

On the 11th of September, IsZo Capital and other shareholders presented <a href="https://www.smartkarma.com/entities/nam-tai-property-inc" target="_blank" data-smartkarma-citation="entities:29275:1" rel="noopener">Nam Tai Property Inc (NTP US)</a> with certification of ownership above 30% and an official request to call a Shareholder General Meeting as per the bylaws. That started the clock ticking.The next business day, the Nam Tai CEO and Chairman of the Board Mr. Ying Chi Kwok, who happens to be the younger brother of the CEO of largest shareholder <a href="https://www.smartkarma.com/entities/kaisa-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:169:1" rel="noopener">Kaisa Group Holdings (1638 HK)</a>, <a href="https://www.sec.gov/Archives/edgar/data/829365/000156459020043351/ntp-6k_20200914.htm" target="_blank" rel="noopener">resigned</a> "for personal reasons", effective immediately. A week later, Nam Tai <a href="https://www.sec.gov/Archives/edgar/data/829365/000156459020044137/ntp-6k_20200921.htm" target="_blank" rel="noopener">named</a> Dr Lai Ling Tam, to the role of Executive Chairman, and Mr Jiabiao Wang as CEO. Both are ex-Kaisa. So much for independence. In my previous insight <a href="https://www.smartkarma.com/insights/nam-tai-property-an-interesting-activist-situation" target="_blank" data-smartkarma-citation="insights:43183" rel="noopener">Nam Tai Property - An Interesting Activist Situation</a> which introduced the activist situation, I concluded by saying... <blockquote>...where the company has just spent a lot of cash last quarter buying the Dongguan asset and now that cash is depleted, there could be a risk of a downturn so the company would need to raise cash by offering shares. A third-party placement to a strong development partner like Kaisa might be engineered. It is often the way of things. It is specifically what the activists and their supporters are trying to make sure does not happen. But they are right to be worried that it might.</blockquote>And so it did. I was trying to be gentle in my wording. It is not clear that I needed to be. <a href="https://www.smartkarma.com/entities/nam-tai-property-inc" target="_blank" data-smartkarma-citation="entities:29275:1" rel="noopener">Nam Tai Property Inc (NTP US)</a> on 5 October announced pre-open that it had raised US$170mm through a private placement (PIPE) of common shares to <a href="https://www.smartkarma.com/entities/kaisa-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:169:1" rel="noopener">Kaisa Group Holdings (1638 HK)</a>.There may be problems with this.  There may not be.More below the fold.

On the 11th of September, IsZo Capital and other shareholders presented Nam Tai Property Inc (NTP US) with certification of ownership above 30% and an official request to call a Shareholder General Meeting as per the bylaws. That started the clock ticking.The next business day, the Nam Tai CEO and Chairman of the Board Mr. Ying Chi Kwok, who happens to be the younger brother of the CEO of largest shareholder Kaisa Group Holdings (1638 HK), resigned "for personal reasons", effective immediately. A week later, Nam Tai named Dr Lai Ling Tam, to the role of Executive Chairman, and Mr Jiabiao Wang as CEO. Both are ex-Kaisa. So much for independence. In my previous insight Nam Tai Property - An Interesting Activist Situation which introduced the activist situation, I concluded by saying... ...where the company has just spent a lot of cash last quarter buying the Dongguan asset and now that cash is depleted, there could be a risk of a downturn so the company would need to raise cash by offering shares. A third-party placement to a strong development partner like Kaisa might be engineered. It is often the way of things. It is specifically what the activists and their supporters are trying to make sure does not happen. But they are right to be worried that it might.And so it did. I was trying to be gentle in my wording. It is not clear that I needed to be. Nam Tai Property Inc (NTP US) on 5 October announced pre-open that it had raised US$170mm through a private placement (PIPE) of common shares to Kaisa Group Holdings (1638 HK).There may be problems with this.  There may not be.More below the fold. 

Nam Tai Property - Equity Placement Is Awful Governance. Permanent Entrenchment Risk Exists.

Event-Driven

<a href="https://www.smartkarma.com/entities/nam-tai-property-inc" target="_blank" data-smartkarma-citation="entities:29275:1" rel="noopener">Nam Tai Property Inc (NTP US)</a> has been the stomping ground for a small US-based activist and a few other shareholders since last year with one shareholder IsZo Capital LP there as the top independent shareholder since 2017, and "public" since filing a 13G in February 2019. Nam Tai Property - founded in 1975 - was originally an electronics company based in Shenzhen. It changed its name to Nam Tai Property in 2014. It is listed, somewhat oddly, on the NYSE.In May, IsZo Capital - which at the time owned 9.8% of shares out vs 6.68% at end-December - sent the company a <a href="https://www.prnewswire.com/news-releases/iszo-capital-lp-releases-an-open-letter-to-nam-tai-property-inc-shareholders-301066020.html" target="_blank" rel="noopener">letter</a> which it also released to the public. IsZo was upset that Nam Tai was trading at only about US$4.05 at the time, which was a 70% decline since the share price in January 2018, 28 months earlier, when <a href="https://www.smartkarma.com/entities/kaisa-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:169:1" rel="noopener">Kaisa Group Holdings (1638 HK)</a> replaced the CEO with Ying Chi Kwok who was the younger brother of the CEO of Kaisa (and himself owns 13.8% of Kaisa). Kaisa had themselves bought in at just under US$17/share, paying CNY 750mm for 6.5mm shares held by then-lead shareholders Koo Ming Kown and Cho Sui Sin. They bought another 1.1mm shares in the quarter and then another 1.583mm in Q4 2017 to get to the current position of 9.191mm shares. That was 25.01% when they got there but ESOP plans have dropped that to 23.61% now.Before the letter in May, IsZo had been rallying shareholders to its cause, and the register saw significant turnover, presumably towards shareholders friendly to the activist cause. The letter WAS on a <a href="https://fixntp.com/resources/" target="_blank" rel="noopener">website</a> (<a href="https://fixntp.com" target="_blank" rel="noopener">https://fixntp.com</a>) that IsZo put up but it is no longer there. The letter itself explained issues with Kaisa's history and conflicted ownership and called on shareholders to reconstitute the Board and remove Kaisa insiders from leadership roles, proposing a slate. Another fund, Railroad Ranch Capital, wrote a <a href="https://www.railroadranchcapital.com/ntp" target="_blank" rel="noopener">letter</a> in June 2020 supporting IsZo's proposals. They said they owned 4.5% in shares and derivatives.While this situation has been on my radar I haven't done much with it. I take a brief look below the fold.

Nam Tai Property Inc (NTP US) has been the stomping ground for a small US-based activist and a few other shareholders since last year with one shareholder IsZo Capital LP there as the top independent shareholder since 2017, and "public" since filing a 13G in February 2019. Nam Tai Property - founded in 1975 - was originally an electronics company based in Shenzhen. It changed its name to Nam Tai Property in 2014. It is listed, somewhat oddly, on the NYSE.In May, IsZo Capital - which at the time owned 9.8% of shares out vs 6.68% at end-December - sent the company a letter which it also released to the public. IsZo was upset that Nam Tai was trading at only about US$4.05 at the time, which was a 70% decline since the share price in January 2018, 28 months earlier, when Kaisa Group Holdings (1638 HK) replaced the CEO with Ying Chi Kwok who was the younger brother of the CEO of Kaisa (and himself owns 13.8% of Kaisa). Kaisa had themselves bought in at just under US$17/share, paying CNY 750mm for 6.5mm shares held by then-lead shareholders Koo Ming Kown and Cho Sui Sin. They bought another 1.1mm shares in the quarter and then another 1.583mm in Q4 2017 to get to the current position of 9.191mm shares. That was 25.01% when they got there but ESOP plans have dropped that to 23.61% now.Before the letter in May, IsZo had been rallying shareholders to its cause, and the register saw significant turnover, presumably towards shareholders friendly to the activist cause. The letter WAS on a website (https://fixntp.com) that IsZo put up but it is no longer there. The letter itself explained issues with Kaisa's history and conflicted ownership and called on shareholders to reconstitute the Board and remove Kaisa insiders from leadership roles, proposing a slate. Another fund, Railroad Ranch Capital, wrote a letter in June 2020 supporting IsZo's proposals. They said they owned 4.5% in shares and derivatives.While this situation has been on my radar I haven't done much with it. I take a brief look below the fold. 

Nam Tai Property - An Interesting Activist Situation

China

Nam Tai Property Inc. operates as a property development and management company. The Company focuses on redeveloping parcels of land in China into commercial complexes. Nam Tai Property conducts business in China.

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Nam Tai Property - Equity Placement Is Awful Governance. Permanent Entrenchment Risk Exists.

In the previous insight Nam Tai Property - An Interesting Activist Situation which introduced the activist situation,

Travis Lundy

Nam Tai Property - An Interesting Activist Situation

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Travis Lundy