SCHEDULE: Hillhouse Funds Oppose Smart Share Global Buyout

Major shareholders HHLR Advisors and Hillhouse Investment Management publicly challenge Smart Share Global's proposed going-private transaction, citing undervaluation and a flawed negotiation process.

Summary

• HHLR Advisors and Hillhouse Investment Management (Reporting Persons), holding 14.4% of Smart Share Global Ltd.'s Class A Ordinary Shares, oppose the proposed going-private transaction.
• They believe the Special Committee's determination to proceed with the Merger Agreement is 'wrong and ill-made' and question why the Issuer must be taken private.
• The Reporting Persons highlight that Smart Share Global's ADSs have consistently traded above the US$1.25 offer price daily since August 15, 2025.
• They argue the sale price to insiders is below the current stock trading price and the Issuer's cash amount, and the Special Committee failed to justify this to public shareholders.
• Concerns include a lack of price negotiation, limited advisor selection, potential conflict of interest with legal counsel, and a financial advisor's valuation range (US$1.23 to US$1.29) that suspiciously aligns with the US$1.25 offer price.
• The Reporting Persons urge the Special Committee to terminate the Merger Agreement and maintain Smart Share Global as a public company.

Sentiment

Score: 3

Explanation: The filing expresses strong negative sentiment regarding the proposed going-private transaction, citing undervaluation, flawed process, and potential conflicts of interest, indicating significant dissatisfaction from a major shareholder.

Positives

• Smart Share Global's ADSs have consistently traded above the proposed US$1.25 buyout price since August 15, 2025, indicating market confidence above the offer.
• The Reporting Persons, holding 14.4% of the company, are actively advocating for public shareholders' interests against a potentially undervalued buyout.

Negatives

• The proposed going-private transaction is believed to 'substantially undervalue' Smart Share Global.
• The Special Committee allegedly conducted no price negotiation with the Consortium before entering the Merger Agreement, despite shareholder concerns.
• Concerns were raised about the independence and selection process of the Special Committee's legal and financial advisors, with only one of each interviewed.
• The financial advisor's valuation range (US$1.23 to US$1.29) is criticized for being suspiciously narrow and aligning perfectly with the US$1.25 offer price.
• The Special Committee failed to address why a sale below market price and cash value is in the best interest of public shareholders.

Risks

• Undervaluation: The Issuer may be taken private at a price significantly below its intrinsic value and current market trading price (US$1.25 offer vs. consistently higher trading prices).
• Flawed Governance Process: The Special Committee's negotiation and evaluation process is criticized for critical deficiencies, including lack of price negotiation and potentially compromised advisor independence.
• Conflict of Interest: The Issuer's long-term legal counsel (Skadden) also advised the Special Committee, raising questions about its independence in the transaction.
• Shareholder Disadvantage: Public shareholders may be forced to sell their shares at a price that does not reflect the company's true value or market sentiment.
• Loss of Public Status: The company's delisting would remove investment opportunities for public shareholders and potentially reduce transparency.

Future Outlook

The Reporting Persons intend to continuously review their investment and reserve the right to take further actions, including proposing changes to operations, management, board, governance, or capitalization, acquiring or disposing of securities, or entering into financial instruments to adjust economic exposure. They urge the Special Committee to terminate the Merger Agreement and maintain the Issuer as a public company.

Management Comments

• The Special Committee's determination is wrong and ill-made.
• The Special Committee did not address why the Issuer must be taken private by the Consortium and why the Issuer should not continue to be a public company.
• The Special Committee never answered why a sale of the Issuer to insiders at a price below the stock trading price and below the Issuer's cash amount is in the best interest of public shareholders.
• The January Proposal, the Merger Agreement and the contemplated going-private transactions substantially undervalue the Issuer.
• The deficient negotiation and evaluation process.
• We urge the Special Committee to act in the interests of unaffiliated shareholders to terminate the Merger Agreement and the contemplated transactions, and to maintain the Issuer as a public company.

Industry Context

This filing highlights a common scenario in public markets, particularly with companies undergoing privatization, where significant shareholders challenge management or special committee decisions regarding valuation and process. It reflects ongoing tensions between controlling shareholders/management and minority public shareholders, especially in take-private transactions where information asymmetry and potential conflicts of interest can arise. The consistent trading above the offer price suggests the market perceives higher value than the proposed buyout.

Comparison to Industry Standards

• The Special Committee's alleged lack of price negotiation with the Consortium before signing the Merger Agreement deviates from best practices for independent committees, which typically involve robust negotiation to maximize shareholder value.
• Interviewing only one legal counsel and one financial advisor, especially when one advisor (Skadden) has a long-term relationship with the Issuer, falls short of the standard for ensuring independent and unbiased advice in a going-private transaction. Best practices often involve soliciting multiple bids for advisory services to ensure competitive and independent counsel.
• The financial advisor's valuation range (US$1.23 to US$1.29) aligning perfectly with the US$1.25 offer price, without clear justification for ignoring higher market trading prices, raises concerns about the thoroughness and independence of the valuation process compared to industry norms for fairness opinions.
• The failure to address why a going-private transaction at US$1.25 is superior to maintaining public company status, especially when the stock trades higher, contrasts with the fiduciary duties of a special committee to articulate clear benefits for unaffiliated shareholders.

Corporate Governance

Stakeholder Impact

• Shareholders (Unaffiliated/Public): Potentially significant negative impact due to alleged undervaluation of their shares in the proposed going-private transaction and a flawed process that may not prioritize their best interests.
• Management/Consortium: Potential benefit from acquiring the company at a price below market value and cash amount, as alleged by the Reporting Persons.
• Board of Directors/Special Committee: Under scrutiny for their decision-making process and fiduciary duties in evaluating the merger.

Next Steps

• The Issuer's shareholders will consider and vote upon the Merger Agreement at an extraordinary general meeting.
• The Reporting Persons intend to continuously review their investment in Smart Share Global Ltd.
• The Reporting Persons may propose changes in the Issuer's operations, management, board of directors, governance, or capitalization.
• The Reporting Persons may acquire additional securities or dispose of some or all of their beneficially owned securities.
• The Reporting Persons may enter into financial instruments or other agreements to adjust economic exposure.

Key Dates

Recommendation

The filing reveals a significant shareholder (14.4%) believes the proposed going-private transaction at US$1.25 per ADS substantially undervalues Smart Share Global Ltd., especially as the ADSs have consistently traded above this price. For a seasoned investor, the immediate risk is that the transaction proceeds at the current low offer, forcing a sale below market value. While the Reporting Persons are advocating for a better outcome, the certainty of a higher offer or the deal's termination is not guaranteed. Therefore, a tactical 'sell' at the current market price (which is above the US$1.25 offer) would allow investors to capture the premium over the proposed buyout price and avoid the downside risk if the deal closes as currently structured.

Keywords

Smart Share Global, Schedule 13D/A, Going Private Transaction, Shareholder Activism, Merger Agreement, Undervaluation, Special Committee, Corporate Governance, Hillhouse, HHLR Advisors, Proxy Statement, ADS, Class A Ordinary Shares