All the Lipstick in China Can't Cover Up Jumei's $397 Million in Value Destruction

Published on August 30, 2017 6:30 AM

(SI Newswire) BOSTON, Massachusetts – An 18-month buyout ordeal triggered by a Chairman’s lowball bid to buy out shareholders of online cosmetics retailer Jumei International Holding Ltd. (NYSE: JMEI) has resulted in $397 million in market value destroyed for shareholders.

“It is time for the Board to immediately end this debacle,” stated Peter Halesworth, Managing Partner of Heng Ren, in his letter to Jumei’s Board of Directors (see links below). “We have not heard since February 2016 from Chairman Leo Ou Chen about his $7.00/share buyout offer. The stock is now at $3.20.” *

Jumei proclaims it is the leading online cosmetics retailer in China. While online retail is booming in China, Jumei’s stock has fallen -45.2% since Chairman Chen proposed a buyout of shareholders on February 17, 2016 in partnership with venture capital firm Sequoia Capital (China).

On that date Chairman Chen wrote to shareholders on behalf of fellow bidders Sequoia and Jumei co-founder Yusen Dai to assure them financing for the acquisition would be secured in a “timely” fashion, and “the Acquisition will provide value to the company’s shareholders.”

“Eighteen months and $397 million in market value lost for shareholders later, it is obvious Chairman Chen’s reassurances were wrong,” Halesworth stated. Heng Ren values Jumei at more than $8.00 per share.

Since the 2016 bid, Jumei shareholders have been “flying blind” because:

- Jumei has not held a conference call about its financial results for 22 months.

- Jumei has not released any financial information about operational results in 2017.

What shareholders do know is the $331 million in cash reported by Jumei at the end of 2016 (whose market capitalization is $479 million) may be in jeopardy.

This year Jumei surprised investors by investing a total of $59 million in a phone battery power bank start up, and a Chinese television drama series. Jumei has never paid shareholders a dividend, and has bought back only $145,000 in stock.

These “questionable investments appear irrelevant to the core online business and a waste of valuable shareholder cash,” Halesworth stated.

Heng Ren Partners’ August 29 letter to Jumei’s Board of Directors demands they:

- Disband the Special Committee reviewing Chairman Chen’s bid. - Pay shareholders a special dividend of $1.50/share. - Disclose 2016 evaluations of the Board and the CEO. - Inform investors why the buyout has taken 18 months – double the average time needed for buyouts of U.S.-listed Chinese stocks - without any information for shareholders.

“The Board should no longer underestimate the financial damage done to shareholders caused by Chairman Chen’s lowball offer and your delinquent leadership,” Halesworth wrote.

Link to English version of Heng Ren letter: http://hengreninvestment.com/images/documents/HengRenLettertoJumeiAugust292017-English.pdf

Link to Chinese version of Heng Ren letter: http://hengreninvestment.com/images/documents/HengRenLettertoJumeiAugust292017-Chinese.pdf

* Based on closing price of August 25, 2017.

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Contact:

Peter Halesworth Heng Ren Partners LLC phalesworth@hengreninvestment.com