Buy the dip?
Almost two months since ZTE was halted on news that the US government had dealt the firm a “death sentence” banning the tech giant from buying US parts (due to breaking Iran sanctions – and spying allegations), the telecoms company has resumed trading in Hong Kong – down 37.5% at the open…
The White House announced the initial ban on ZTE buying parts from US firms in April, after the company was found to have violated a settlement originally imposed over ZTE’s sales to Iran in defiance of US sanctions. As part of the original settlement, ZTE had agreed to fire certain senior managers and withhold bonuses from others. But the company didn’t follow through with either promise.
Then last Thursday shortly after Commerce Secretary Wilbur Ross announced the administration had worked out a deal to save ZTE which meant the company would pay a penalty of $1.3 billion (plus place another $400 million in escrow to be seized should the company again fail to hold up its end of the bargain). The company would also be forced to accept – and pay for – a team of compliance officers that will be led by a “special independent compliance coordinator” who will report jointly to ZTE’s CEO, its board and the Commerce Department.
