Sinovac Biotech Announces 850% Dividend Yield After Seven-Year Legal Battle

Sinovac Biotech, a prominent vaccine manufacturer, has announced a significant dividend payout, totaling 23.6 billion yuan. This move comes after a seven-year legal battle between the company's founders, marking a pivotal moment in the company's history. The dividend payout is structured in three phases. The first phase involves a cash dividend of 55 dollars per share, equivalent to approximately 400 yuan. The second phase, scheduled for after the special shareholders' meeting on July 8, will see an additional dividend of 19 dollars per share. The third phase will involve distributing between 20 to 50 dollars per share from future surplus cash.

The dividend payout is unprecedented, with the first phase alone amounting to 3.3 billion dollars, or approximately 23.6 billion yuan, resulting in a dividend yield of around 850%. If all three phases are implemented, the total dividend payout could reach nearly 7.5 billion dollars, or approximately 53.4 billion yuan, which is nearly 20 times the company's market value at the time of the halt in trading.

The story behind this massive dividend payout is one of intense corporate rivalry and legal battles. The conflict began in 2016 when disagreements arose between the two founders over the company's direction. One founder sought to return the company to the domestic market, while the other aimed to maintain its presence in the United States. The dispute escalated in 2018 when one founder, backed by an activist investment fund, attempted to remove the other from the board. The targeted founder responded with a "poison pill" strategy, issuing new shares to dilute the opposing side's stake and retain control.

The legal battle that ensued lasted for seven years, involving dramatic episodes such as the seizure of company seals, changes in locks, and allegations of bribery. In 2019, the company's stock was suspended from trading due to governance issues, and the legal disputes continued. Despite the suspension, the company's subsidiary, which produces the COVID-19 vaccine, attracted significant investment, leading to a substantial increase in the company's profits. In 2021, the company's net profit surged to 14.5 billion dollars, a dramatic increase from the 240 million dollars earned between 2015 and 2020.

However, as the global pandemic subsided, the company's financial performance declined sharply. In 2022, its revenue plummeted by 92%, and it reported a net loss of 790 million dollars in 2023. The company's financial reports for 2024 have not been released, and the legal battles continue to impact its operations. One of the founders was sentenced to 13 years in prison for embezzlement and misuse of funds, further complicating the company's governance issues.

In January of this year, a significant legal development occurred when the Privy Council in London ruled that the "poison pill" strategy implemented in 2018 was invalid, leading to a change in the board of directors. However, the company's management quickly contested this decision, alleging that the new board did not comply with the court's orders. The legal battles continue, with the company's future hanging in the balance. The recent dividend payout is seen as a strategic move to distribute the company's substantial profits before further legal complications arise. The complex legal and financial landscape of Sinovac Biotech highlights the challenges faced by companies operating in multiple jurisdictions and the potential for prolonged legal disputes to impact their operations and governance.