When a father signs off a letter to his daughter, “Yours Sincerely,” things have come to a pretty pass. Investors who have poured a net $150bn into emerging market equities over the past two years – much of it into family-dominated firms – should take a good look at the Stanley Ho saga transfixing Hong Kong.
The ailing tycoon, father of 17 children by four women, has spent the past month contesting his own estate with wife number three and five progeny from wife number two. Minority shareholders in Hong Kong-listed SJM Holdings, which took in almost a third of gross gaming revenues in Macau last year, have not known where to look. On Wednesday, the HK$72bn ($9.3bn) company lost almost a 10th, driving its valuation to a historic low relative to peers, before recovering on reports of a truce. There are legitimate reasons for weakness: SJM is yet to develop any properties on Macau’s Cotai strip, for example, where Chinese tourists are increasingly swarming. But the widening discount to the likes of Wynn Macau and Sands China is best explained by squabbles over Mr Ho’s assets. His Sociedade de Turismo e Diversões de Macau, which holds 56 per cent of SJM, is a good example of the business model prevalent across Asia, where a patriarch owns an umbrella entity that controls a cascade of subsidiaries and affiliates, often run by his offspring. Prospectuses may warn, as SJM’s did, that founder/chairmen can “influence or control our business in ways that might not be in the interests of other shareholders”. But investors in sprawling conglomerates in India, Indonesia, Korea, the Philippines, Thailand and Malaysia may not appreciate the risk of a feud until they see one. The one constant, as the paterfamilias divvies up the spoils, is that minorities just don’t matter.