he author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Ka Sing Chan

HONG KONG, June 10 (Reuters Breakingviews) - It’s hard to beat the likes of Elon Musk and SpaceX on mixing iffy governance and key-man risk. But tech tycoons from the People’s Republic seem to like giving it a go. The latest example is Victory Giant Technology 300476.SZ, 2476.HK, the Nvidia supplier whose shares dropped 8% on Monday, as the broader market slipped just 1%, after its chair’s possible affair went viral.

The company was until then perhaps largely known for its share price more than doubling in the month after its $2.6 billion secondary listing in Hong Kong in April. Or perhaps for founder and Chair Chen Tao being the only guest from mainland China when Jensen Huang hosted a high-profile dinner for core partners in Nvidia’s NVDA.O global ecosystem last year in Taipei. But then a leaked video purporting to show Chen kissing a woman who is not his wife in an elevator went viral on social media.

The incident raises the question of whether he'll stay as chair and what might happen with the 25% or so stake Chen co-owns with his wife. Husband and wife founders are not uncommon in China, including those at petrochemicals giant Hengli Group and search-engine operator Baidu 9888.HK. But messy divorces can quickly morph into corporate risks including a change of control at the top.

Moreover, a lack of succession planning is a big factor. E-retailer JD.com's 9618.HK market capitalisation tanked by $7 billion in a week in 2018 after its powerful and entrenched founder and Chair Richard Liu was arrested in Minnesota on suspicion of sexual assault. The case was later settled. The abrupt death in December 2023 of SenseTime's 0020.HK Tang Xiao’ou sent shares in the facial recognition champion he founded tumbling over 10% in a day, so close were the fortunes of the company perceived to be tied to its founder-chair. The stock is now a third lower, making it a laggard in the recent AI rally.

Granted, some U.S. tech titans are turning key-man risk into an art form. SpaceX's $75 billion initial public offering on Friday will bestow on Elon Musk supervoting stock, the ability to appoint most of the board and sole power to remove himself as chair and CEO, among other jollies.

Yet Chinese bosses are often in charge of keeping politicians and regulators onside - a must in the tech sector where government support and contracts are key. That makes Victory Giant's Chen hard to replace: A former PLA soldier with limited industry experience, he has cultivated close ties with Huizhou’s local government, securing cheap land for its base, R&D subsidies, bank financing and strategic investment. SenseTime, meanwhile, derived some 30% of its revenue from government-related contracts before Tang's death.

Chen's "kiss cam" incident is a reminder to shareholders of the dangers of putting too many eggs in one basket.

CONTEXT NEWS

Hong Kong-listed shares of Victory Giant Technology (Huizhou) fell 8% on June 8 after Chairman and CEO Chen Tao’s alleged extra-marrital affair was caught on camera and went viral. The benchmark Hang Seng Index fell 1% in the same session.