Ordinary Gweilo

According to the SCMP (subscription required) on Saturday, investors are now wary of companies afflicted with Compulsive Asset Shuffling disorder, and shunned the placement of shares in Dong Fang Gas, into which the property portfolio of PCCW was recently injected (as mentioned here a couple of months ago).

Investors have been reluctant to buy the placement shares of Dong Fang Gas Holdings, the property unit of fixed-line carrier PCCW, despite the lure of a hefty discount. Yesterday’s lacklustre response left PCCW holding too many shares of Dong Fang, in breach of the minimum 25 per cent float requirement. The company has applied to the stock exchange for an exemption.

Or, according to The Standard, PCCW has successfully placed 237 million shares in Dong Fang Gas and raised HK$628 million:

the share placement received a warm reception from investors and was 1.25 times covered, the source said.

I suppose there are always two sides to every story. Citibank priced the offer at a discount and yet was unable to place enough shares to meet the 25 percent free float requirement, which doesn’t sound like a success, but it depends what they were expecting – at least they did place some shares, and within the indicated price range.

The story in the SCMP mentions the Vanda fiasco, which saw Hutchison generating cash and a few lucky shareholders selling their shares when the price spiked, whilst everyone else was left out of pocket. Since then Vanda has been renamed to Hutchison Global Communications, but the share price is still in the doldrums. It’s therefore quite understandable if investors are nervous when another member of the Li family starts shuffling assets.

The other problem is that although Hong Kong property companies may look attractive when the property market is buoyant, there is no guarantee that investors will benefit in the same way they would if they directly owned property. Especially not if Richard Li is in charge.