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Best World shares plunge 11% on news of China's crackdown on direct selling firms

BEST World International (BWI), a direct seller of skincare and wellness products, in response to the Singapore Exchange's queries on its unusual trading performance on Tuesday, referred to a Bloomberg report on Aug 15 which had reported on market concerns of a crackdown by regulators on the market practices of certain direct selling companies, even though BWI was not named as one of them.

The rout followed a statement posted on China's State Administration for Industry & Commerce (SAIC) website on Aug 14 announcing a three-month campaign to police pyramid schemes.

The statement by SAIC followed news reports of the drowning of a university student who allegedly fell victim to a pyramid selling scheme's advertisement posted on a popular recruitment website. The case is still under investigation.

In response, BWI highlighted that although it holds a direct selling licence, it has not converted its business in China to direct selling yet. Currently, its DRs' Secret, Avance and Optrimax products are available for purchase by customers through DRs' Secret outlets and workshops.

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"As such, the above SAIC statement has little or no impact to our China business. The company also wishes to highlight that all current preparations for conversion to direct selling are in line with the above SAIC statement. All service outlets set up are subject to verification by local authorities beforehand and are not within or near to any school compound...

"Our membership criteria, upon conversion to direct selling, shall also not accept students, civil servants, police and military personnel, etc. The company would like to reiterate that it adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China's laws," it said.

By 4.41pm, its shares had plunged 11 per cent to S$1.37 on a volume of 26.7 million shares traded.