The Government often encourages a foreign investor to acquire shares in a wholly State-owned enterprise to become a foreign strategic investor. It would be a huge PR success for a State-owned enterprise to successfully sell shares to a foreign investor during its equitisation. However, an equitisation investment is actually not ideal for a foreign investor from a legal or deal execution perspective.
This is because in an equitisation process, in a relative short period of time, the sell side must handle many moving targets of which closing of the strategic sale is only one. Some of these moving targets are (1) conducting a public offering shares to public investors; (2) obtaining valuation result on real estate portfolio; (3) completing tax finalization; and (4) conducting hand-over of assets and liabilities to newly equitised enterprise. Any change by the seller in any other part of the equitisation process whether intentional or unintentional may materially affect the strategic sale and the foreign investor (e.g. the IPO price, the hand-over of assets to newly equitised enterprise and the potential increases of State capital).
Therefore, to be safe, it may be better for a foreign investor to wait until all other parts of the equitisation process are settled (preferably until hand-over is complete). Of course this approach may not work for very attractive target which has many potential buyers.