Corporate governance problems crash share prices of Chinese seafood firms

A Tai Er restaurant.

The share price of Jiumaojiu International Holdings, the operator of one of China’s most successful seafood restaurant chains, recently plunged following the revelation of habitual corporate governance issues at the firm.

Guangzhou-based Jiumaojiu, which operates the Tai Er chain of restaurants that is well-known in the country for serving fish with sauerkraut, has seen its share price tumble over 80 percent from early 2022, falling to a mid-December 2023 price of HKD 6.21 (USD 0.86, EUR 0.75) per share after being traded as high as HKD 31 (USD 4.34, EUR 3.72) the year before.

Jiumaojiu operates nearly 500 outlets of Tai Er across China, according to its 2023 interim report, and also oversees other brands, including Lai Mei Li Grilled Fish and the Song Hot Pot chain. Globally, the company had 621 restaurants in its operational portfolio as of 30 June 2023, with a footprint in China, Canada, Hong Kong, Malaysia, and Singapore. 

A major buyer of catfish, pangasius, tilapia, snakehead, and perch, the Tai Er chain opened 46 new outlets in the first half of 2023, while Jiumaojiu’s smaller Lai Mei Li grilled fish restaurant chain opened four new outlets.

In previous years, investors had been enthused by the success of Tai Er, which raked in sales of CNY 2.1 billion (EUR 294 million, USD 273 million) in the first half of 2023. However, stock-buyers soured on the firm when it announced that a wholly owned subsidiary of Jiumaojiu lent money to another company owned by Guan Yihong, the chairman and founder of Jiumaojiu. The CNY 81 million (USD 11.3 million, EUR 10.5 million) loan, which has since been repaid, did not receive approval from the company’s board, which is required under Hong Kong stock market rules.

The loan incident that led to the steep dropoff in share prices was not the first corporate governance issue that has plagued the firm. A similar incident occurred in 2022, when Jiumaojiu’s board disclosed the firm had invested in a commercial real estate project in Guangzhou without informing investors as required by stock market rules.

The subsequent drop in Jiumaojiu share prices could significantly limit the company’s ability to raise capital,

This has been a troubling trend for Chinese seafood-related firms as ... 

Photo courtesy of WikiMedia Commons

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