Global Sources (GSOL) yesterday announced a very aggressive expansion plan for its 2008 exhibition business.
Altogether there will be a 74% increase in number of booths to these major shows in 2008, adding to the increasing booth selling price this should be very good news to investors.
However, market either did not pick up the news or was impartial to its 2008 plan, share price of GSOL dropped a further 4% yesterday.
From the date I first wrote about GSOL on 17 May, its share price has gone up by 37% but recently free fallen significantly with only 3% gain left.
So what’s the problem with GSOL?
It’s all about poor investor relationship management and too heavy insider shareholding.
I’ve done a comparison table as follows:
As can be seem, GSOL’s insiders (which essentially are the management team) are holding 71% of all issued shares, versus the other Chinese comparables I’ve chosen (there is no direct comparable, I’ve picked some China internet companies for the ‘China concept’) which is several times higher.
Besides, only 10% of company shares are hold by institutional investors and mutual funds, again it is significantly lower than the others.
The roller coaster share price which doesn’t truly reflect the company’s business fundamental is largely due to the light trading volume (0.2M)
Mr. Merle Hinrichs is the founder and CEO of the company, who has been running the company for 35 years. I do pay high respect to the management team for the solid business they have built, however, I wish Mr. Hinrichs can spend more time with institutional investors and increase their interest in the company.
The next 6 months probably is the best time to do that so as to leverage institutional investors’ interest in China B-B companies as created by the coming Alibaba’s listing.
For Jack Ma, founder and CEO of Alibaba, he shall seriously consider acquiring GSOL. With Alibaba and GSOL combined, it will be the clear leader in China providing integrated B-B trading, marketing and exhibition business.
GSOL will announce its Q2 result this Thurs, tighten your seat belt for another roller coaster ride!
Disclosure: I am LONG GSOL