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The day Zhong Shanshan became China’s third-richest man

A former mushroom grower and onetime hawker of Chinese medicine’s answer to Viagra has vaulted his way into the technology-heavy ranks of China’s richest individuals with the initial public offering of Nongfu Spring, the country’s top producer of bottled water.

© VCG via Getty Images

The $1bn IPO of Nongfu on Tuesday turned founder Zhong Shanshan (pictured above) into China’s third-richest man. His net worth now sits at $51bn — just behind Tencent’s Pony Ma and within sight of Alibaba founder Jack Ma, valued at about $58bn.

Nongfu’s Hong Kong listing caps off a sweeping rags-to-riches story for Zhong, who dropped out of school at the age of 12 after his parents were targeted during Mao Zedong’s Cultural Revolution.

After picking mushrooms and working as a reporter for a few years, Zhong turned to selling pills made from turtle parts — a popular treatment for erectile dysfunction in China — in the early 1990s, minting his first fortune. 

When regulators started scrutinising the efficacy of the pills, Zhong switched to bottled water, launching Nongfu in 1997.

The 65-year-old is known in Chinese business circles as the “Lone Wolf” due to his distinctive personality. “I am a man on my own,” he once told local media. “I don’t care about what my peers are doing and thinking.”

His wealth has surged since the start of the year thanks in part to his 75 per cent stake in the Covid-19 test kit maker Wantai Biological. Shares in that company are up more than 2,000 per cent since it listed in Shanghai in April. 

Nongfu’s IPO was also a world-beater in terms of the retail bids it received in Hong Kong — more than 700,000 individual investors. 

©  Alamy Stock Photo

Now the thirst for shares in Nongfu — whose red-capped water bottles are ubiquitous at official gatherings in China — is so great that it triggered a clawback option, boosting the IPO’s retail tranche from 7 per cent to 27 per cent of shares on offer.

Traders said well-known cornerstone investors, Fidelity and the Singapore wealth fund GIC, helped to boost retail demand for Nongfu shares.

The stock closed up 54 per cent on its first day of trading, in what feels to DD like another sign of an overheated market that has divorced from reality. 

We told you last week about Hong Kong’s double life as a thriving financial centre and hotspot of political unrest as China wields its iron fist over the territory.

The listing is one of many by blue-chip Chinese companies debuting in Hong Kong, who have raised billions of dollars in the city against the backdrop of rising tensions between Beijing and Washington. 

All attention will now shift to Ant Group’s gargantuan IPO, which has a chance to break the record for the largest share offering in history.

Private equity: don’t raise our taxes — we’ll flee

When a consensus emerges between Barack Obama, Donald Trump, Michael Bloomberg, Bernie Sanders, Elizabeth Warren and Nat Rothschild, it’s probably worth paying attention. 

All have, at some point, backed higher taxes on “carried interest” — the multimillion-dollar payouts that private equity executives can receive from their funds. 

And yet, nothing has changed. 

Private equity’s super-rich worldwide still pay lower tax rates on their “carry” than many ordinary workers pay on their income. Now their UK lobbyists are fighting to keep it that way. 

As DD’s Kaye Wiggins revealed, the industry group the British Private Equity & Venture Capital Association is gearing up to resist any move by chancellor Rishi Sunak (pictured below), who has ordered a review of capital gains tax, to raise the rate. 

(Explainer: carried interest is classed as a capital gain, not income, meaning it is taxed at a lower rate.) 

© Reuters

A private document circulated to the BVCA’s members late last month — though later published on its website after the FT’s story came out — showed it’s planning to make what has become a common lobbying refrain.

It goes like this: tax us more and dealmakers will leave the country. The implication is that they could potentially, in the longer term, take with them the private equity firms themselves and the lawyers, bankers and other professional advisers whose services they pay for, hitting London’s status as a financial services centre. Read up here

This is a similar argument to the one that first helped the industry to secure favourable tax treatment in the UK back in the 1980s. 

It worked then, and it might work now, even though the government is desperate for cash to cover the enormous public expenditure that the coronavirus crisis has brought about. 

Any change would involve dealing with powerful and well-resourced lobbyists and armies of tax advisers ready to help dealmakers minimise their bills, all while the government is wrestling with both Brexit and the pandemic. So, reforming tax on carry might well end up — like it has so many times before — back on the “too difficult” pile. 

Celebrities distil stardom into spirits

The liquor store has become more star-studded than a pre-pandemic Oscars red carpet event, with household names such as George Clooney, Jay-Z and David Beckham jostling for a spot on your top shelf.

Actor Ryan ReynoldsAviation American Gin was recently snapped up by Diageo for $610m, a deal requiring the Canadian heart-throb to continue marketing the gin over the next decade.

© FT montage

At DD we especially enjoyed Reynolds’ viral interception of the “Peloton Wife”, allowing her to seek solace in a smooth gin martini.

It was the British alcohol multinational’s fourth big celebrity booze deal after paying $1bn for Clooney’s Casamigos tequila and partnerships with P-Diddy’s DeLeón tequila and Beckham’s Haig Club whisky.

Chart showing sales growth rate for celebrity-backed drinks

Celebrity allure has helped justify A-list beverages’ premium price tags to consumers over other top-shelf brands. 

“When Casamigos was first announced, there was a lot of cynical and critical comment. When Aviation was announced, people thought ‘it worked with Casamigos — maybe it’s going to work here’,” said Bernstein analyst Trevor Stirling.

Chart showing that celebrity-fronted drinks are gaining popularity

Premium spirits including whisky and tequila are even expected to outperform their mass-market counterparts, creating ample opportunity for celebrities hawking their wares.

But as consumers reach for their most trusted brands to wash away those lockdown blues, celebrity spirits — traditionally sampled in bars — will have to up their game.

“The celebrity endorsement will help a lot on social media, but getting liquid on lips is much harder to do,” said Stirling.

Job moves

  • Amy Sun, a partner on the growth investing team at Sequoia Capital, has left to start an unnamed company.

  • Sard Verbinnen & Co has acquired Oakhill Communications. The Oakhill team will join SVC’S London office, including founders Craig Leviton and Lee Petar, who will become members of the SVC public affairs leadership team.

Smart reads

Reversing the Benz Daimler chief Ola Källenius has a plan to turn round a “lost year” of profits at the century-old maker of Mercedes-Benz vehicles following airbag recalls, alleged emissions manipulation, and the pandemic’s economic toll. (FT)

Shop till they drop The coronavirus crisis has been debilitating for the retail industry. That isn’t stopping Jamie Salter and David Simon. The licensing expert-mall operator duo is on a shopping spree of bankrupt retailers. (New York Times)

Going public in a pandemic The days of drawn-out IPO roadshows are moot, replaced by Zoom calls between bosses and investors. Direct listings and reverse mergers with “blank cheque” companies, which require less travel and fanfare, are also forging new paths for companies to list. (FT)

News round-up

General Motors takes $2bn stake in electric vehicle maker Nikola (FT + Lex

Silver Lake backs edtech start-up Byju’s at $11 billion value (Bloomberg)

KKR-owned Hensoldt to list shares in Frankfurt (FT + Lex)

Elliott Management discloses stake in Chevron target Noble Energy (Reuters)

Deloitte puts UK restructuring business up for sale (FT)

JPMorgan says staff and customers may have broken law on Covid-19 loans (FT)

Snowflake looks to raise about $2.38bn in US IPO (Reuters)

British Airways owner suffers big shareholder revolt over pay (FT)

GTT said to be nearing sale of European assets to Macquarie (BBG)

ByteDance gives bonuses to staff after TikTok turbulence (FT) 

EU resumes LSE, Refinitiv deal probe, decision by December 16 (Reuters)

Tesla shares tumble in biggest decline since March (FT)

Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to

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