A Chinese hedge fund manager is launching a rare activist campaign to boost returns.
Huakun Ding, founder of Goldenwise Capital Group, set his sights on New York-listed GEE Group Inc., buying a stake of more than 5% and pushing for changes including a potential sale of the human resources firm. GEE shares have jumped 28% since Goldenwise’s Aug. 15 filing.
That’s just the start, said Ding, who’s identified other targets including Hong Kong-traded rice firm Golden Resources Development International Ltd. Ding says these firms are undervalued and could generate hefty returns once management makes the changes he’s seeking.
“You need to find a target that has a stable business, but also a lethal shortcoming that’s curable,” Ding said by phone from Shanghai.
Ding stands out among Chinese firms with the activist push. Aside from Ping An Insurance (Group) Co.’s recent campaign against HSBC Holdings Plc, Chinese hedge funds and investors aren’t known for these aggressive tactics.
Globally, activist campaigns are on the rise, after jumping to a record high in 2022. There have been 541 campaigns launched already this year — almost half with US targets — compared with 663 for all of last year, according to data compiled by Bloomberg. There’s been no China targets this year.
Read more: Busiest Activists Really Do Win on Returns: Bloomberg Deals
Ding said he started volatility arbitrage trading in 2008 while pursuing a master’s degree in financial mathematics at the University of British Columbia. He founded Goldenwise Capital Management in Canada in 2012, before moving the operations to Hong Kong. He later set up a mainland business, Goldenwise Capital Group (Shanghai) Ltd., while focusing on undervalued listed companies.
Goldenwise targeted GEE because it has good cash flow but needs to better use the money to boost shareholder value rather than seeking expansion through acquisitions, he said. Ding’s also pushing for more share buybacks and changes to the board.
GEE didn’t respond to requests for comment.
Another target is Golden Resources, a rice seller with a market value of about HK$1.1 billion ($140 million). Investors have underestimated the company’s convenience-store operations in Vietnam, Ding wrote in an article on his firm’s Wechat account.
Golden Resources didn’t respond to requests for comment.
While he’s only targeting firms with market values of up to $500 million for now, Ding said he may aim higher as his financial resources grow. Goldenwise manages about $200 million, while the Shanghai business runs about 300 million yuan ($41 million), he said.
