Why Nobody Invests in A-Shares: Maotai Parent Company Screws Shareholders

Caixin: Moutai Maker’s Shares Plunge on Direct-Sales Plan

Since the beginning of this year, Moutai has launched a major overhaul to increase the proportion of direct sales and reduce the number of dealers. According to Moutai’s 2019 sales plans, 17,000 tonnes of liquor are assigned to dealer channels, accounting for about 55% of the total sales target, down from about 80% in 2017. In 2018, only about 6% of revenue came from sales at the company’s own stores and on its online retail platform, and the rest came from the dealer network.

The parent group controls 62% of the Shenzhen-listed distilling company. The group-owned sales network suggests that at least some of current sales will be transferred from the listed company to the parent group, diverting revenue from the listed company, according to some investors and analysts.

This is one of the better performing A-shares and popular with foreign investors. Yet what are they invested in? At any moment, the state-owned company can change the relationship between listed shares and the parent. And MSCI is (was?) planning on pumping your emerging market and global indexes full of these companies.

More on Maotai from iFeng: 茅台大刀砍向“毒贩子”？
Sogou translation

The article makes a good case for Maotai's move from a business perspective, but that is not the issue. It's that the company has publicly traded equity and the business change is being implemented through the parent company, not the listed shares.