SA contributor Ottoman Bay Research accuses Giant Interactive (GA -3.8%) chairman Shi Yuzhu of siphoning "tens of millions of dollars of shareholder cash out of the company and into his own private equity firm," courtesy of investments made by Giant that have seen heavy losses.
Ottoman also points out "independent director" Jason Jiang, who happens to be on the special committee evaluating Shi's $11.75/share going-private offer, is a founding partner of Shi's P-E firm, and thinks Jiang will likely have to resign.
The firm is skeptical of Shi's willingness to make good on his buyout offer, and notes he has sold 11% of his stake in recent months at levels well below the offer price. It also observes buyout partner Barings Private Equity is "no stranger to walking away from bad businesses even after proposals were made," and thinks Giant's 61% op. margin warrants scrutiny, given it's far higher than that of peers such as NetEase, Shanda, and Perfect World.