Money Machine

Chapter 19Coveted Prize

Now that the news about SDB was positive on several fronts, interest in the bank blossomed.

Among the first to come calling was GE Capital (GEC). It had been more than two years since Frank Newman and Jeffrey Immelt had inked a deal for GEC to make an investment. Then, the securities regulator had blocked it. Now that SDB's share reforms were done, GEC wanted in again.

Under the terms of the earlier agreement, SDB was to issue to GEC new shares priced at 5.247 yuan per share. But now that the stock was trading at about 30 yuan, there was no chance the regulator would approve the placement at such a deep discount. Frustrated, the project leader on the GEC side threatened to sue SDB for breach of contract. The threat was an empty one; the contract clearly stipulated that it was subject to regulatory approval. It was certainly not the fault of SDB that the approval had never been granted.

Given where the stock price stood, in mid‐July 2007, GEC offered to revise the contract, raising the issue price to 20 yuan per share. It was highly doubtful the regulator would approve that price, either; it was still about a third below the market. But we felt obligated to GEC to give it a try. We visited the CSRC in Beijing, but once again the regulator was unequivocal: Its rules stipulated that the shares had to be priced at no less than 90% of the 20‐day volume‐weighted average. GEC was unwilling to pay that price. Despite two years of mutual effort, it was just not ...