The life of a minority investor, part one. In London this year, Essar Group bought the shares in Essar Energy it did not already own. Minority investors deemed the price unfair; Essar Group pushed the deal through with its 78 per cent holding. The case prompted a new rule protecting minorities. The lesson? The majority holder of the economic interest should not be allowed to bully the little guy.
The life of a minority investor, part two (the revenge). In Hong Kong this week, New World Development was blocked from buying minorities out of 31 per cent of New World China Land. The shareholders who stymied the bid owned less than 1 per cent of New World China Land’s shares. They held sway under the headcount rule ranking all shareholders equal, regardless of economic interest: any number of shares, one vote. Through disproportionate influence, the minority have wiped 20 per cent off everyone’s holdings – their own included. Critics are crying for a rule change. The lesson? Minorities should not be allowed to hold the majority to ransom.
In both cases, investors are complaining about relative influence. Minorities usually want more. But in some cases they are content to settle for none. Google and Facebook have share structures denying minorities influence over the board. Minorities in Alibaba, when it lists, will also have no say over the way the company is run. But the desire to be part of a growth story overrides the fear of being taken for a ride.