The latest: Resort operator Fosun Tourism Group (1992.HK) announced on Wednesday its controlling shareholder, Fosun International (0656.HK), agreed after the market closed Sept. 5 to sell 28 million shares of the company to an independent third party for HK$8.57 per share.

Looking up: The company implied that recent volatility for its stock may be related to the share sale, making the announcement an apparent move to allay investor concerns.

Take Note: A controlling shareholder’s reduction of its stake in a company is generally considered a negative signal, possibly showing the shareholder has its own capital needs or isn’t optimistic about the company’s prospects.

Digging Deeper: Global tourism took a big hit after the start of the Covid-19 pandemic in early 2020, dealing a big blow to Fosun Tourism. The company swung from a profit of 610 million yuan ($88.4 million) in 2019 to a loss of 2.57 billion yuan in 2020, and the loss widened to 2.71 billion yuan last year. Despite the challenge of new Covid strains, the company’s international travel business showed signs of recovery this year as countries gradually reopened their borders. Revenue for Fosun Tourism’s Club Med resort chain jumped 336% to 5.74 billion yuan in the first half of the year, fueling a 130% overall revenue surge to 6.42 billion yuan for the period. As business improved, the company’s net loss narrowed to 197 million yuan in the first six months of 2022 from 2 billion yuan a year earlier.

Market Reaction: Fosun Tourism’s shares sank on Wednesday, closing down 7.5% at HK$7.40 at the midday break, a new 52-week low.

Translation by Jony Ho

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