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Why Shares of Nam Tai Property Inc. Are Soaring Today

What happened

Shares of Nam Tai Property Inc. (NYSE: NTP) jumped on Wednesday after the chairman of the company, M.K. Koo, agreed to sell 6.5 million shares at a large premium to a real estate developer. Koo informed the company that this deal is part of his transition toward retirement. The stock was up 22% as of 11:30 a.m. EDT, to about $10 per share.

So what

Koo agreed to sell 6.5 million shares of Nam Tai Property held by him and his wife for $17 per share, more than double the 30-day trading average. The buyer is Kaisa Group Holdings Ltd., a real estate developer listed in Hong Kong.

This investment by Kaisa Group concludes a three-year search for a strategic partner. Nam Tai Property's core business is the development of two properties in Shenzhen, China, after transitioning away from electronics manufacturing services in 2014. Nam Tai Property believes that the price paid by Kaisa Group is a better reflection of its intrinsic value than the current stock price.

Following the close of the deal, Koo and Kaisa Group intend to consider the possible appointment of one or more designees of Kaisa Group to the Nam Tai Property board of directors.

Now what

Nam Tai Property views Kaisa Group's experience in real estate development as a benefit as it works to develop its two major properties. The sale price suggests that the stock could be worth significantly more than the current stock price, but that will depend on the success of those two projects. The transaction is expected to be completed by Aug. 11, following the company's second-quarter report.

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