Ordinary Gweilo

Here’s a cautionary tale about what can happen when rich businessmen start shuffling the pack.

Li Ka Shing’s Hutchison Whampoa sold one company it owned (Hutchison Global Crossing) to another company it controls (Vanda) in return for new shares, and then sold the shares at a discount to the market price.

This caused the share price of Vanda to jump from HK$1.11 to HK$1.52 after the first part of the deal was done, and then fall back to HK$1.05 after the shares were sold at a discount. Hutchison made a profit because the new shares were issued at HK$0.80 and sold at HK$0.90, but what about those investors who thought they were on to a good thing buying Vanda shares between HK$1.11 and HK$1.52?

Riding on the coat tails of someone like Li Ka Shing is obviously a risky business.