Autohome is facing a shareholder rebellion that is only getting worse. The Chinese company is being very tight lipped about the revolt.
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- Company Profile
Autohome Inc. operates as an online destination for automobile consumers in the People's Republic of China. The company, through its Websites, autohome.com.cn and che168.com, delivers comprehensive, independent, and interactive content to automobile buyers and owners, including professionally produced content that comprises automobile-related articles and reviews, pricing trends in various markets, and photos and video clips; automobile library, which includes a range of specifications covering performance levels, dimensions, powertrains, vehicle bodies, interiors, safety, entertainment systems, and other unique features, as well as manufacturers suggested retail prices; new and used automobile listings, and promotional information; and user forums and user generated content. Autohome Inc. also offers advertising services for automakers and dealers; dealer subscription services that allow dealers to market their inventory and services through its Websites; used automobile listings services, which allow used automobile dealers and individuals to market their automobiles for sale on its Websites.
In April, Telstra Corp, which owns 55% of Autohome, said it was going to sell a 48% stake to Ping An Insurance Group for $1.6 billion. CEO James Qin is now leading a revolt against his previous benefactor that helped launch the company and get it listed on the NYSE. There is a suit and Qin is launching a rival bid. When the company needed startup capital Telstra was the investor. Qin and other minority shareholders representing 11% of the outstanding shares have lodged a petition with the Grand Court of the Cayman Islands where the company is registered. The suit claims Telstra's representatives on the board of Autohome allegedly acted in bad faith and breached the rules. Qin is trying to form a coalition with multiple private equity firms to launch a competing bid. Qin made a firm offer of $31 a share in April including a bank letter of credit to finance the deal and it was rejected. The next day Telstra said it was selling its shares for $29.55 to Ping An. Qin's group countered at $31.50 that caused a peak in Autohome shares at $32.15 in expectations for a bidding war that never appeared.
The board is deeply divided and Telstra will not provide any supporting documents for the "purported" sale to Ping An. Telstra has 5 directors on the board and there are 5 independent directors. On May 13th Telstra convened a board meeting to approve the deal. The 5 independent board members refused to show up so there was no majority. The 5 Telstra directors appointed a 6th director on the spot, completely against the corporate rules, and the 6 directors approved the deal. The group aligned with Qin filed the petition with the court to put a hold on any acquisition until the proper documents are submitted and the full board can review the documents vote on the matter. Telstra still refuses to provide any documentation and the fight continues.
Meanwhile shares are crashing. On Monday, the company reported the CEO Qin and the CFO had been replaced and five new directors had been appointed. The company stated the sale of 47.4% of the outstanding shares to Ping An had been completed on June 22nd. It appears the hostile takeover has been completed but the court fight is ongoing.
On Wednesday, shares closed at a historic low at $20.54. This company appears broken and normal shareholders are fleeing to the exits. There was no bounce on either is the last two days when the markets were up big.
Zacks changed their rating to Strong Sell. Credit Suisse changed their rating to Sell.
Earnings August 3rd.
Short ATHM shares, currently $20.54, initial stop loss $22.15.