Time for Beijing Media Corp to have a look in a Legal Mirror?

Beijing Media Corporation, the 'advertising arm' of the Beijing Youth Daily group, listed on the Hong Kong stock exchange in December 2004. The Government of Singapore Investment Corporation and the South African media group MIH (Naspers) bought significant chunks of the company, which at the time of listing, seemed to be pioneering a way for foreign investors to get into Chinese media.

A year later, things are not going so well. Since the IPO, a slow-down in the real estate market has hit Beijing Media Corp where it hurts most, as property advertising comprised most of the revenue of the company's most profitable newspapers.

And now comes this news, from the Shanghai Daily:

BEIJING Media Corporation Ltd, currently under investigation for alleged corruption, suspended the trading of its shares yesterday, according to a company filling with the Hong Kong stock exchange.

An analyst who did not want to be identified told Shanghai Daily that key shareholders were negotiating on the possible transfer of shares...

...Two senior executives, Niu Ming and Zheng Yijun, had allegedly set up their own companies that gained an unfair business advantage from Beijing Media.

The Beijing municipal government has launched a high-level investigation into allegations of bribery and corruption at the company and is due to deliver a report on the probe next month, according to earlier reports.

Beijing Media reported a 99.7 percent slump in its first-half profit, to 170,000 yuan (US$21,000).

Given Beijing Media Corp's mix of connection with the Beijing government and dependence on real estate — the most corrupt business in China aside from coal mining — it is hardly surprising that something rotten turned up so quickly.

Nonetheless, Beijing Media Corp does own some of the best circulated newspapers and best known media brands in the capital. If they manage to turn out the rotten apples and diversify their advertiser base away from real estate, this scandal is unlikely to affect the future potential of the company.