LakeShore Biopharma (LSBCF) — Merger Arbitrage — 90% Upside

Current Price: $0.45/share (edit: $0.70/share)

Offer Price: $0.86/share

Upside: 90% (edit: 25%)

Expected Timeline: TBD

Important note: the stock price ran up quickly after the market opened, so I’ve adjusted the starting price and spread above to more realistic levels. The write-up below remains unchanged.

I’m rushing this out because the situation is extremely timely. Please keep that in mind and let me know if I’ve missed anything important. Below is my best understanding of the situation for now.

LakeShore Biopharma has received a non-binding privatization offer of $0.86/share from a consortium that includes its controlling shareholder (52% stake) and another long-term investor. The offer was submitted in August, and is currently under review by a special committee.

Until recently, the spread hovered at 5–10%, which, for a Chinese privatization at the non-binding stage, suggested a high level of market confidence. Over the last two days, however, the spread widened to 90% after the stock was delisted from Nasdaq. The downgrade appears to have triggered forced selling, with volumes running 10–20x above normal. The delisting itself took effect yesterday (Monday), though the heavy selling had already begun on Friday.

No new updates or information related to the privatization have come out. The delisting itself should not have affected the takeover process either. So the spread widening looks more like a mechanical market overreaction than any fundamental change in the event-driven setup. Given that LSBCF is an orphaned/obscure Chinese US-listed stock, such a dislocation is not difficult to imagine.

The investment thesis is simple – the spread should quickly revert to prior levels or close to it. If that happens, the upside from the current price could be massive. The stock now trades on the OTC market under a new ticker ‘LSBCF’ (previously it was ‘LSB’).

There are several indications that this privatization attempt is genuine:

1. The controlling shareholder Crystal Peak Investments, which owns 51% of LSBCF, acquired its stake through a private placement in July at an effective price of $0.71/share. It is now seeking to buy out the rest of the company at $0.86/share, offering minority holders a premium to its own entry price.
2. Another consortium member is Oceanpine Capital, a Chinese PE firm with US$3bn in assets under management. Oceanpine was a shareholder of LSBCF back in 2021, when the company was still private. Oceanpine’s managing director still owns a 1% stake and also recently served as chairman of LSBCF (in 2024–2025). He resigned in May 2025, just a few months before the privatization proposal. Oceanpine actually made the takeover offer on its own initially, with Crystal Peak joining the consortium a bit later. In addition, another one of Oceanpine’s partners currently serves as LSBCF’s CFO and a director. So while the PE firm does not own much stock, it certainly knows the business it is trying to buy very well.
3. LakeShore Biopharma has a real/legit operating business focused on developing and manufacturing vaccines. Its only commercial product is rabies vaccine in China, where it holds the number two position in the market. As a single-drug biopharma, LSBCF remains under-scaled and unprofitable. However, it has a sizable pipeline of vaccines for rabies and other indications, with plans to expand into other geographies eventually. The lead candidate, an improved, next-gen rabies vaccine, has shown positive interim results and phase 3 trial is expected to conclude this year.

A possible scenario is that these shareholders believe in LSBCF’s science and intend to develop it further in private markets, free from the constant pressure of raising equity at depressed stock prices.

The main risk is that the offer gets cancelled. However, this would only matter for the thesis if the cancellation was announced in the next few days, before the spread has time to normalize. Again, I don’t see how the delisting itself could have changed the buyer’s intention to proceed with the buyout. The offer was made just a month ago, so it’s unlikely that the business has changed materially either. I believe the spread will normalize well before any updates on the privatization emerge.

Other details

• There is limited information available on Crystal Peak Investments (the controlling shareholder). It may be connected in some way to Oceanpine Capital, given the interesting sequence of events that have transpired: Oceanpine’s managing partner resigned as LSBCF chairman in May >> Crystal Peak became the controlling shareholder in July >> Oceanpine made the buyout offer on August 18 >> Crystal Peak joined the consortium ten days later. However, this is a pure speculation on my part.
• LSBCF does have a somewhat muddy past. Over the last few years, it battled and eventually ousted its former chairman for misconduct and corporate asset misappropriation. China now intends to issue an international arrest warrant for him. However, these issues are now long in the past and new people are managing the company now.
• In the aftermath of the battle with the ex-chairman, LSBCF’s controlling shareholder changed twice, each time through new equity issuance via private placements. Both previous controlling shareholders are still on the register. One is Apex Prospect, which stake is now at 24%. Apex is an activist that helped to refresh LSBCF’s board after the former chairman was ousted. The second is Yi Zhang, the ex-chairman himself, who still owns 12% stake.