Haidilao’s stock rout exposes funding risk from Beijing’s taxation crackdown as payments loom
Investors are eyeing whether tax-related share sales spread to other companies with founders’ wealth held through overseas structures
The turmoil surrounding Chinese hotpot chain restaurant operator Haidilao International Holding could serve as a warning to investors of the funding risks stemming from Beijing’s new taxation regime on overseas assets held by wealthy individuals.
A plan by Shu Ping, the co-founder and wife of Haidilao chairman Zhang Yong, to sell 259 million shares – a 4.65 per cent stake – sent the stock plunging 10 per cent in Hong Kong this week.
While Haidilao said the stake reduction, which stands to generate about HK$2.75 billion (US$351 million) in proceeds for Shu, was intended for personal funding needs, investors promptly linked it to the implementation of a new income tax on offshore trusts. The regulatory framework requires the owners of such trusts – typically established in Hong Kong, Singapore or the Cayman Islands – to declare assets and remit tax payments before a 90-day grace period expires in October.
The new tax could add to the financial pressure on offshore-trust owners, potentially prompting them to raise funds through stake sales before the payment deadline. The investment risks associated with increased regulatory scrutiny of private overseas wealth also appear poised to spread far beyond Haidilao.