Hedge fund giant D.E. Shaw & Co. is demanding more than $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 D.E. Shaw, which manages more than $55 billion, said it spent $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% annualized return if Ledudu didn’t complete an initial public offering by Sept. 1, 2015, D.E. 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 D.E. 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 Inc., whose shares tumbled in 2020, according to exchange filings.
A spokesman for D.E. 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.
D.E. Shaw said it sent a redemption notice in September. When no payment was made, D.E. Shaw filed the suit against Grand State Investments Ltd., a Cayman Islands holding vehicle for Ledudu Education shares, and which D.E. Shaw now wants put into liquidation.