Chinese Arts Company Goes Public in Bid to Grow

Chinese Arts Company Goes Public in Bid to Grow

By DAVID BARBOZAFEB. 24, 2014

SHANGHAI — The China Poly Group Corporation, a state-run conglomerate that got its start selling weapons to the People’s Liberation Army, has over the past few decades successfully branched into developing real estate, selling sports cars and producing television sitcoms. Now the company’s huge arts and culture division — Poly Culture Group Corporation — is planning an initial public stock offering that could raise up to $330 million and bolster the prospects of the company in the world’s biggest and fastest-growing art and auction market.

By filing this week to sell shares on the Hong Kong Stock Exchange, Poly Culture hopes to become an international brand. It already manages dozens of Chinese cinemas, theaters and performance halls, and it competes with the world’s largest auction houses, Christie’s and Sotheby’s, in art sales.

“We are very big in the art auction market in mainland China but still have a long way to go to become the biggest auction house worldwide,” the company’s chief executive, Jiang Yingchun, said at a news conference last week, according to Chinese news media.

Beijing Poly International Auction, a division of Poly Culture, is already the world’s third largest auction house, with about $1 billion in reported sales in 2012.

Christie’s and Sotheby’s were, until recently, restricted from doing business in mainland China and operated mostly from Hong Kong. Now, Christie’s operates independently in China, and Sotheby’s has a joint-venture partner here. Still, both can deal only in watches, wine, jewelry and contemporary art, not the more lucrative markets of cultural relics, calligraphy and ancient works.

The initial public offering for a division of Poly is a sign of China’s transformation into a market economy, and the government’s eagerness to develop its cultural organizations to protect and promote Chinese culture at home and abroad. Several other divisions of Poly are already publicly listed, including Poly Real Estate Group. According to the new filing, the Beijing-based Poly Group, which has longstanding ties to the military and the family of the former Chinese leader Deng Xiaoping, will retain 67 percent of Poly Culture’s shares.

In the prospectus filed last week, investors were cautioned about the potential risks of investing in Poly Culture, which was formed around 2000.

It, for example, has suffered, as other Chinese auction houses have, from a problem that has plagued the nation’s art market: buyers who bid up prices but then fail to pay for the items after the auction. According to the prospectus, settlement rates on its auctions have declined in recent years. “Although we actively review the outstanding fees and liaise with relevant parties to speed up the collection process,” the company wrote, “there is no assurance we could settle all the amounts from relevant buyers in due course, or at all.”

Also, last year the United States imposed sanctions on Poly Technologies, a defense equipment division that American authorities accused of violating the nonproliferation policy that controls weapons traffic with Iran, Syria and North Korea. (The Chinese government has opposed the sanctions and insisted they be lifted.)

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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