DE Shaw seeks US$71m in claim over stake in China schools

[BEIJING] Hedge fund giant DE Shaw & Co is demanding more than US$71 million from a Chinese school operator it invested in that failed to sell shares to the public as promised, according to a recent lawsuit.

New York-based DE Shaw, which manages more than US$55 billion, said it spent US$20 million in 2013 to acquire preferred shares in Ledudu Education, a private company that operates schools and kindergartens in China.

The shares could be redeemed with an 18 per cent annualised return if Ledudu didn't complete an initial public offering by Sept 1, 2015, DE Shaw said in the lawsuit filed Jan 12 in the Cayman Islands.

The claim offers a rare glimpse into a private market deal gone wrong at one of the world's most profitable hedge funds. Closely held DE Shaw, which last year raised capital for a debut onshore China fund, had made several investments in Chinese education, including a bet on RYB Education, whose shares tumbled in 2020, according to exchange filings.

A spokesperson for DE Shaw declined to comment. Calls and emails to Ledudu Education's offices went unanswered.

Headquartered in Beijing, Ledudu Education has provided pre-school education to more than 100,000 Chinese households over its almost two-decade history, the company said on its website.

DE Shaw said it sent a redemption notice in September. When no payment was made, DE Shaw filed the suit against Grand State Investments, a Cayman Islands holding vehicle for Ledudu Education shares, and which DE Shaw now wants put into liquidation.

BLOOMBERG