The dotcom shakeout has hit Hong Kong with a vengeance as many of the firms which listed in the spring with such fanfare at amazingly high prices now begin to conserve cash or face slower than expected growth in the market-place. As a result the GEM (Growth Equity Market) has fallen sharply and the flow of new listings, while not halted, is abating.
New media companies are among the worst hit: last month the South China Morning Post abruptly cut back its ambitious web plans, laying off some staff, and this week Apple Daily Online is downsizing sharply. Also last month, Pacific Century CyberWorks launched (or rather didn't launch) a far less ambitious broadband entertainment service than it had been trumpeting under the Network of the World label.
With more than two-thirds of the stocks being traded on the GEM below their issue prices, officials of the Hong Kong Stock Exchange said this week that 10 out of the 50 high-tech companies which had applied to list on the GEM have delayed their listing schedules, and it was thought that most of them, from Internet start-ups, were in fact outright cancellations.
Other companies are sticking to their listing plans, but are scaling down their offers either in price or in size or both. Last week AcrossAsia Multimedia cut its issue by 60% to raise less than a third of its original target of HK$1.6bn; Panda-Recruit, which is listing this week, cut its ipo by 55% in size and is issuing its shares at less than 30 cents each, the lowest so far of any GEM offering; Jade Bird Universal Sci-Tech (Beijing University security solution provider) is cutting down its issue nest week by nearly half to HK$264 million.
The ceo's and advisers of these companies all agree that it is better to get some sort of offering away, so that hassled executives can get on with running their businesses, even if plans have to be trimmed to match lower cash resources. Low issue prices can still attract retail investors, and offers are normally several times over-subscribed, although little of the interest comes from institutional investors, who have been badly burned by the spring's high-profile adventures, in which retail investors found it hard to come by many shares. This may be one occasion on which the small guy comes out on top!
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