Closing Lufax

Screwing minority shareholders with the convertible

It has come to my attention that Lufax management has recently altered the terms of their convertible debt (source):

Based on the terms and conditions of the Ping An Convertible Promissory Notes, as a result of the Special Dividend, the Conversion Price will be adjusted from US$12.76 per Share as at the date of this circular to US$2.32 per Share upon settlement of the Special Dividend, and thus, upon full conversion, the Ping An Convertible Promissory Notes can be converted into a maximum number of 421,077,586 Shares (the “Conversion Shares”). The Company considers that the adjustment formula is in line with market practice for anti-dilution provisions in convertible securities. Since the conversion period of the Ping An Convertible Promissory Notes will only commence on April 30, 2026

So this would mean shares outstanding could reach over a billion shares. I was kind of blindsided by this move as I expected Tung Kung (holding company for various Ping An executives) to provide some protection against this.

If Lufax earns $550 million by 2026, stock trades at nearly 5x earnings right now. And those earnings aren’t certain, so I sold my entire stake and closing this idea with a ~40% return.