Chinese companies often use Cayman to raise funds overseas and list on the US stock market. In recent years, a considerable number of Cayman-domiciled, US-listed Chinese companies have returned their businesses to private ownership. These deals are typically pursued by larger shareholders, which often include the original owner. Some take-private transactions have reached the Cayman courts, with minority shareholders saying the offers for their shares in the deals were too low. Section 238 of the Cayman Companies Act protects minority shareholders whose shares are acquired in mergers by giving them access to a fair-value appraisal in court. Disputes tend to centre on how fair value is calculated, for example, using discounted cash flow, a market-based approach or another method.
On 21 November 2025, Justice Raj Parker of the Cayman Islands Grand Court handed down his decision in Sina Corporation, finding that the merger price of US$43.30 per share significantly undervalued the company. The correct price was US$105.26 per share, leading to a judgment of US$1,005,938,693 plus interest. This decision represents the highest award to date under the section 238 jurisdiction.
Background
Sina was the first Chinese internet company to be listed on the NASDAQ. In addition to its online media content and micro-lending business, Sina had a controlling interest in Weibo Corporation (Weibo), a Chinese microblogging platform (similar to Twitter/X), as well as long-term investments, the most significant of which was TuSimple Holdings Inc. (TuSimple), an autonomous trucking company.
On 6 July 2020, New Wave MMXV Ltd (New Wave), a company owned and controlled by Charles Chao, Sina’s CEO and chairman, made an initial offer of US$41.00 per share. New Wave held 7,150 Class A Preference Shares, which gave Chao voting power exceeding 55.5% of the company’s voting power. Together, the buyer group had 61.6% of the company’s voting power.
The merger was announced on 6 July 2020 (the Announcement Date), and New Wave’s best and final offer of US$43.30 per share was accepted on 28 September 2020. The EGM was held on 23 December 2020 (the Valuation Date), and the merger closed on 21 March 2021. The dissenting shareholders of the company (the dissenters) exercised their section 238 dissent rights, and on 18 May 2021, Sina presented a petition to the court seeking a determination of the fair value of the dissenters’ shares.
As with all section 238 trials, there were three distinct issues: (i) the reliability of the merger price; (ii) the reliability of the market trading price; and (iii) the valuation issues.
Merger price
Chao stated in the initial offer letter that he was not interested in selling his stake in Sina and made clear his intention to veto any alternative transaction. Given this position, the court found that (i) there was no realistic and fair opportunity for alternative bidders to pursue a potential deal, and (ii) the company was taken private by Chao, where he had a clear majority stake and evident self-interest in the outcome, and the price arrived at. Accordingly, the court concluded there was no mechanism for price discovery and no reliance should be placed on the merger price.
Market trading price
The issue of market price traversed both Sina and Weibo, given Sina’s controlling stake in the latter.
Sina
With respect to Sina, the dissenters’ expert, Professor Bilge Yilmaz, conducted a set of tests using a conventional event-study methodology and concluded that Sina’s stock price reactions did not provide sufficient evidence of semi-strong-form market efficiency.
By contrast, Sina’s expert, Sid Jaishankar, eschewed the conventional test and instead put forward what he described as a ‘qualitative analysis’ of efficiency.
Among the many difficulties arising from this approach was that Jaishankar had failed to determine whether, on a given news day, the stock price moved in the expected direction. It followed that he had failed to establish any basis to conclude whether the price movement he observed was consistent with efficiency or inefficiency.
The court found that there was no academic or practitioner support for Jaishankar’s test and that, unlike Professor Yilmaz, he had failed to produce an empirical analysis of the causal relationship between information surprises and price movements. As a result, the company had not discharged its burden to prove that the market for Sina shares was semi-strong efficient.
Leaving aside efficiency, the court found that there was evidence of material non-public information and that Sina had not recovered from the effects of COVID, rendering reliance on Sina’s share price unreliable.
Regarding Weibo, the experts agreed that, up to the announcement date, the market for its shares was semi-strongly efficient. However, the experts disagreed as to whether Weibo’s share price was reliable as at the Valuation Date, or whether it had been tainted by the announcement and expectations surrounding the Sina merger. Ultimately, the court concluded that Weibo’s market price had been tainted and therefore was not probative of fair value.
Valuation
The court considered the sum-of-the-parts (SOTP) analysis prepared by the experts. An SOTP analysis consists of determining the value of each of a company’s individual business units or assets and then summing them to arrive at the company’s total value. This approach is particularly useful for companies that operate in multiple industries, where each segment might have different growth prospects, risk profiles, or valuation multiples.
Weibo and Sina
The court valued Sina and the company’s interest in Weibo using a discounted cash flow (DCF) methodology. With respect to Sina, the dissenters argued that given deficiencies in the company’s privatisation projections, DCF was not a reliable method. The court adopted a number of the company’s inputs, leading to a valuation of these parts more in line with the value proposed by the company.
Long-term investments
Both Sina and Weibo combined had about 100 long-term investments (LTIs). Sina’s expert applied a lack of marketability discount (DLOM) of 30% to about 90 of the LTIs and a discount of between 10% and 20% to the rest.
The court found that Jaishankar had not applied sufficient rigour to his analysis of the discounts and had failed to recognise that, where an investment is a private investment, a DLOM is priced in and no further discount should be applied. Accordingly, the court found that discounts should be applied only to the three public investments which were subject to an IPO lock-up period or other disposal restrictions, and, in those cases, consistent with the empirical evidence provided by the dissenters’ expert, a DLOM of only 6% should be applied.
TuSimple
Sina held a 29.8% stake in TuSimple. On 15 April 2021, TuSimple completed an IPO, achieving a valuation of US$7 billion, having made a confidential Form S-1 filing with respect to its proposed IPO on the Valuation Date.
Jaishankar valued Sina’s stake in TuSimple at US$12.73 per share, based on TuSimple’s last financing round (US$14.14 per share plus a 10 per cent DLOM). He also relied on a report prepared by external advisors to TuSimple (for tax reporting purposes with respect to employee stock options and not for the purpose of a valuation of the IPO), to conclude that (i) the likelihood of an IPO at the valuation date was not higher than 50/50; and (ii) that in an IPO scenario TuSimple was worth US$3 billion. The company did not provide any evidence with respect to this report.
Professor Yilmaz, by contrast, undertook a valuation of TuSimple, yielding a value of US$6.6 billion as at the valuation date. He then used empirical data to assess the likelihood of an IPO at the valuation date at 90%. After further appropriate adjustments, he concluded that TuSimple was worth US$30.53 per share as at the valuation date.
The court found that the expected IPO was knowable at the valuation date and that looking at the IPO’s value as at 15 April 2021 did not involve impermissible hindsight. Having considered the competing approaches, the court rejected Jaishankar’s position and concluded that the dissenters’ expert’s analysis was to be preferred, save that the probability of an IPO should be 80% rather than 90%.
HoldCo discount
The final issue for the court to determine was whether a ‘HoldCo’ discount should be applied.
Jaishankar arrived at a SOTP valuation of US$85.66 per share, after which he applied discounts and DLOMs to reduce the value to US$73.75 per share. After this, he applied an additional 42.5% HoldCo discount across all of Sina’s assets, reducing his valuation by a further US$31.34 to US$42.41.
Jaishankar suggested that this represented the difference between the value of Sina as reflected by its market capitalisation, driven by its market trading price, and the calculated en bloc value. He set a number of criteria to explain such a discount, including (i) lack of control, (ii) a complex or opaque multi-player structure, (iii) investment in publicly traded shares where investors could choose to invest directly, and (iv) long-term investments where it may be necessary to apply a DLOM.
The court found that the company’s approach was fundamentally flawed. None of the criteria advanced led to a conclusion that such a discount was justified. No case law or legal commentary had been advanced to support such a discount, and Jaishankar had never in his professional career applied such a discount.
The court went on to find that discounts should be assessed by reflecting constraints and frictions that the investor actually faces, in the economics of the component part of the business or asset/investment under consideration. A rigorous and systematic assessment of any applicable discount for any asset and investment, grounded in justifiable and measurable economic forces, was required. It did not make sense, the court concluded, from an economic standpoint, not to have identified a substantive and principled explanation for any such discount before applying it across the board to an SOTP valuation. Accordingly, no HoldCo discount was to be applied.
Minority discount
Having dismissed the HoldCo discount, the court found that a minority discount of 2% should apply.
Comment
Once the court’s rejection of the company’s position on DLOM, Tusimple and the Hold Co discount is calculated, a share price of US$105.26 (as against the merger price of US$43.30) is arrived at, leading to an uplift of US$1,005,938,693 plus interest. This represents the highest award in Section 238 history.
The lengthy judgment reinforces the court’s commitment to adjudicating fair value for any dissenting shareholder, regardless of whether they are ‘arbitrage’ investors or not. Whilst the judgment follows familiar legal principles, it deals with interesting valuation issues and affirms the importance of a rigorous, structured approach to valuation methodologies.
Simon Dickson is a partner in the Litigation and Insolvency team in Mourant’s Cayman Islands office.
Adam Barrie is a senior associate in Mourant’s Cayman Litigation practice.
