US investment bank Goldman Sachs is said to have sold out shares controlled in Chinese automaker Geely Automobile Holdings Ltd. (SEHK: 0175).
Sources said on October 8 that Goldman Sachs would sell a total of 580 million shares controlled in Geely Auto through a subsidiary and through the sale, it would cash in at most USD 315 million. People close to both sides confirmed the report in an interview later. And hurt by this, the Hong Kong-listed firm closed with a drop of 3.4 percent on October 9.
It thus has become a focal point why it quit the Chinese firm only four years after it bought into the latter as it always determined a five-year investment strategy. A top executive with Geely Auto declined to make a comment on this, stating that the US firm did not gave it a reason, too. In line with people in the know, there are two major reasons. One is that Goldman Sachs had failed to continue serving as a financial consultant in it since 2011 and this directly caused yields the US firm gained in it drop largely. The other is that the US investor does not thought highly of its prospect.
Available information shows that Goldman Sachs bought into Geely Auto four years ago and through a subsidiary namely Goldman Sachs Principal Investment Area, it subscribed about HKD 2.59 billion, or about USD 330 million, worth convertible bonds and warrants of the Chinese firm. And after converting the bonds into shares and exercising the warrants, it saw stake in the latter rise to about 15 percent in total, becoming the second-biggest shareholder of the target after Li Shufu, chairman of the target. The Hong Kong media said in the morning on October 9 that it sold 578 million shares of Geely Auto for HKD 4.15 per share, representing a discount of 5.9 percent of closing price of the latter on October 8. And through the sale, it cashed in about HKD 2.4 billion, or about USD 310 million. Actually, this was not the first time for it to sell shares of the Chinese firm and at the end of last year, it cashed in about HKD 2.38 billion, or USD 305 million, through a similar share sale. And through the two share sales, it cashed in a total of about USD 615 million. And after deduction of the cost, the yields reached USD 285 million, with return on investment (ROI) of about 86 percent.
