Down Play

Feather Factory Fights for Investor Trust

Snowbird managers celebrate their IPO in front of the Frankfurt stock exchange in August.
  • Why it matters

    Why it matters

    Due to a lack of transparency, Chinese firms can be risky investments. Their non-Chinese supervisory boards need to be on the scene in China to be sure they are sound and reassure investors.

  • Facts


    • Down producer and processor Snowbird reported a 70 percent increase in revenue, to €78 million, in the first half of 2014.
    • It produces more than 3,300 tons of down yearly, making it one of the world’s largest producers.
    • The company’s IPO was marred by a unrelated financial scandal at Chinese shoe maker Ultrasonic, which is listed in Frankfurt.
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Viona Brandt travels far for her job. One journey takes her from Germany, all the way to Puyang in Henan, a relatively poor province in China. “It is something of an adventure,” said Ms. Brandt, the supervisory board chairwoman of the feather down company Snowbird.

She frequently goes to to check the company’s operations in Puyang, where products such as bed duvets, pillows and down-filled textiles are made. And for good reason: Chinese companies going public on the German stock exchange are always under suspicion. Many such issues have flopped, and their supervisory boards, which are meant to hold their managers to account, were unable to prevent ensuing scandals.

The most recent scandal concerned Ultrasonic, a Germany-based Chinese shoe company listed in Frankfurt. First, the shoe manufacturer announced that its boss had disappeared with the firm’s money. Then it said he was just on vacation and would bring he money back.

“Ultrasonic was about the worst thing that could have happened to us,” Ms. Brandt said. The news broke right at the crucial phase of Snowbird’s initial public offering and many potential investors cancelled their orders.

The German arms of most Chinese firms are usually just stock exchange vehicles, without direct operative business in Germany. They are “mailbox companies.”

While Snowbird’s stock exchange debut was successful, it only sold stock only amounting to €9.5 million instead of the hoped-for €69 million.  A week or so after the issue, the share price was still languishing just below the issue price.

Snowbird now wants to earn the confidence of the capital markets with reliable figures and scandal-free news. “Growth is assured due to the low proceeds from the issue,” Ms. Brandt said.

The company’s goal is to become the world’s biggest down manufacturer and processor. Its revenues increased by 70 percent in the first half year to €78 million. A new factory will enable Snowbird to quadruple its production capacity. With in excess of 3,300 tons of down yearly, it already ranks among the world’s largest producers.

The company was built on solid foundations, Ms. Brandt said. Snowbird is a medium-sized German family company with a reputation of having trustworthy management and owners. She said the company has insisted on a series of safeguards. Every month, the supervisory board has access to the accounts of the firm in China. Part of the capital raised from selling stock flows into an account of the German company. “We have a very good overview,” Ms. Brandt said.

If a German company’s operations are in China, then supervisory board control and shareholder perusal become more difficult.

The German arms of most Chinese firms are usually just stock exchange vehicles, without direct operative business in Germany – they are “mailbox companies.” Snowbird’s corporate address in Germany is a Hamburg-based law firm, and between the operative Chinese concern and the German company are two intermediate holding companies in China and Hong Kong.

This is unavoidable for tax and legal reasons, according to Maximilian Fischer, who is in charge of corporate communications. He has been to Puyang several times in recent months. He photographed production machines and took samples of down for analysis in Germany – not just for the benefit of local auditors in Asia, but also so German auditors can see for themselves that the machines really do exist.

Ms. Brandt was initially skeptical when approached by a representative of CM-Equity, a private equity company, about chairing the supervisory board. The Munich-based investment firm was involved in Snowbird’s IPO. Ms. Brandt knew her way around the fashion industry and also finance – among other career positions she was head of investor relations at Escada, a German luxury and fashion company.

She said she brought the right expertise to the Snowbird job: “I know the market and the customs in Asia.” But she was equally conscious that her reputation was on the line if Snowbird proved to be a flop for investors.  Liability risks of supervisory board members have also increased.

If a German company’s operations are in China, then supervisory board control and shareholder perusal become more difficult. Daniel Bauer of the Society for the Protection of Small Shareholders in Germany said: “You can only warn against making investments in unknown shares in China.”

Snowbird wants to convince investors of the soundness of the Chinese operation. And the different cultures may be growing closer together. The day after management and controllers met for a supervisory board meeting in Munich following the IPO, they proceeded to take their client-guests to Munich’s famous Oktoberfest.


Axel Höpner has been the Handelsblatt bureau chief  in Munich since 2008. Michael Brächer is a financial editor in the investment team in Handelsblatt Frankfurt. To contact the authors:, Brä

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