You’ve got to feel for Gome. Since suffering a near-death experience almost two years ago, with the arrest of former chairman Huang Guangyu, China’s number two electronics retailer has done almost everything by the book. It sought fresh capital, paid down borrowings, revamped its governance and tore up its land-grab strategy, closing one outlet in eight as it focused on margins.
All the while, though, Mr Huang has made mischief. Before being sentenced to a 14-year stretch in May, China’s youngest self-made billionaire – and still Gome’s largest shareholder – tried to oust directors appointed by Bain Capital, the company’s saviour. Now, from his cell, he is trying to foment an uprising with a post to employees on China’s largest web portal.
None of his accusations holds water. The charge that Bain and its lackeys are contaminating a beloved Chinese brand (turning “guomei”, beautiful country, into “meiguo”, America) is flimsy, since it was Mr Huang who incorporated the parent company in Bermuda and then sold a big chunk of Gome to international institutions in Hong Kong six years ago. But the noise has distracted investors from an increasingly convincing turnround. Since returning from suspension last June the stock’s forward price/earnings multiple has crept up from 17 to 18 times. The multiple of competitor Suning, still firmly in expansion mode, has leapt from 12 to 24.