PCCW has decided to abandon its privatisation plan by letting the buyback offer lapse. On the other hand, Richard Li has told Bloomberg that he hasn’t decided whether he would appeal the ruling made by the Court of Appeal. As a result, PCCW share price dropped 13% today.
On another note, PCCW has declared a special dividend of HKD 1.3 per share. This is good news for minority shareholders as they are actually getting something at the end.
A very dramatic ending. The Appeal Court has blocked the buyout by Richard Li. It seemed like the judges have turned 180 degrees against Richard Li and favored the minority shareholders and the SEC during the course of the appeal. We will know soon whether Richard Li will appeal the case or not.
What will minority shareholders gain actually? Share price will probably drop quite a lot when trading is resumed in the next few days. And I believe the share price will have big upward resistance because of all the negative publicity it has got. And if Richard Li appeals, then this case can drag on for a long time and this will again create upward resistance on the stock. It is a lose-lose situation for Richard Li and minority shareholders.
In the court hearing yesterday morning (Saturday morning), there were 8 retail investors testifying against PCCW; however, the points they made seem to be irrelevant to the privatisation case. Most of them have held PCCW for over ten years and they have suffered big losses and they have expressed their mistrust or contempt against Richard Li for bringing down PCCW and for PCCW’s big drop in share price.
Fair enough, they have the right to express their opinions. But how is their testimonial relevant to the case? Sure, PCCW share price suffered big drop during the tech bust in 2000 and 2001 and Richard Li was, very likely, responsible for the drop. But then, do they think that PCCW share price would go back up to its max price in 2000 if the privatisation was disallowed? No way! What could they achieve by opposing to the privatisation? Nothing. PCCW share price would probably drop further if PCCW was rejected by the court at the end.
Wake up, people. You should move on. When you bought PCCW, you believed in their management and when they failed, that means that you have made a bad investment decision. Then you should move on and find another company that you believe in. Holding on PCCW for 10 years and hoping that it would bounce back to the level you bought ten years ago just don’t make sense to rational investors.
Mainly because PCCW stressed that timing is in essence here and the takeover can be derailed if the takeover didn’t follow the original time frame, the court is working over the weekend this time! The court will re-convene Saturday (18 April 2009) morning. However, due to this constraint in time, the new judge, Anthony Rogers, is not accepting any new evidence from the SFC. With no new evidence being admitted, it basically means that the minority shareholders and the SFC will need to convince Judge Rogers that previous interpretation made by Judge Kwan was wrong. I would think that it is quite difficult given judges probably won’t make a fool of themselves by having two completely different conclusions based on the same set of evidence.
I have a feeling that the appeal will fail and the PCCW privatisation will be allowed again by the court tomorrow morning (or early next week).
The High Court of Hong Kong has approved the PCCW privatisation transaction. Judge Kwan found that the alleged vote rigging is not substantiated by evidence.
On the other hand, the court has allowed the SFC to appeal the ruling. In essence, the PCCW privatisation probably won’t materialise for at least a short while.
The court will announce its decision on PCCW privatisation next Monday. Media has been wondering who the secret persons are in paying for the lawyers representing the minority shareholders. It has been estimated that the legal cost for two day court case can easily be a few million hong kong dollar, given the high caliber of the legal teams involved.
The secret persons probably have some personal grudge on Richard Li? According to Apple Daily, the secret person and the minority shareholders are linked by Long Hair Leung Kwok Hung. Furthermore, it reveals that one of the secret persons is Mr. Chong Wing Cheung, a mentor of “Ah Lek” Chan Pak Cheung. And on radio tonight, some people thought that the boss of the Emperor Group, Yeung Sau Sing, may be one of the secret persons. Maybe the Isabella Leong-Richard Li saga still pisses Mr. Yeung off.
In an interview yesterday, Cathay Pacific chief executive Tony Tyler said the Company plans to spend cash to unwind all their fuel hedging contracts when their contracts are back to the break-even point (the point when the contracts are not making money or losing money and it should be at an oil price between $60-$80). The Company has experienced its first loss in 2008 since the Asian crisis, due to their failed fuel hedging strategy and the dramatic decrease in passengers (particularly in business class and first class).
From reading their annual result announcement, I believe that their hedging strategy involves buying a call and selling a put (a zero cost or very low cost collar). The premium from selling of the put is to offset the cost of buying a call. Currently their puts are costing them billions of dollars. Unwinding the contracts at this moment doesn’t make sense as this would be very costly. When oil price goes back up to $60-$70 (assuming it will happen), then buying new puts to offset the currently shorted puts will be less expensive.
The management is basically taking a view that there will be a time shortly in the future that oil price will go back up to $60-$70 and then it may then go back down to below $50 (otherwise they would not close their the shorted puts). But then what happens if oil never goes back up to $60? Then Cathay Pacific will continue to suffer losses till 2011! This is wishful thinking from Cathay’s management that they can end their hedging contracts very soon.
In today’s newspapers, billionaire Joseph Lau Luen-Hung, chairman of Chinese Estates, said that he is sick of a small group of people who are only very small shareholders and making a lot of noise on the privatisation. Also, he claimed that he knows who is fooling around behind the PCCW privatisation scandal, and that the motivation behind may not be business-related… it can be related to a fight for a wife, a girl friend, etc… Sounds very mysterious to me and a lot of the readers, but I suppose Richard Li should know what he is talking about!
There are currently three companies that are seeking to be privatised by their major shareholders.
1. Shaw Brothers (80 HK): This has just been approved by minority shareholders. Current price is 13.20, and the offer price is 13.35 (1.1% premium)
2. Crocodile (122 HK): Current Price is 0.385 and the offer price is 0.40 (3.9% premium). Frankly I don’t see any problem for it to get all the necessary approval.
3. Nam Tai (2633 HK): Current Price is 1.42 and the offer price is 1.50 (5.6% premium). David Webb has been urging shareholders to accept this bid (http://www.webb-site.com/articles/nteep2.htm), so I believe this again will pass without much problem.
I believe there should be more and more companies getting privatised because of their depressed share prices which went down a lot together with the general market. Investors should pay attention to this space and make some easy profits!
Peace Mark made a public announcement (http://www.hkexnews.hk/listedco/listconews/sehk/20090225/LTN20090225334.pdf) yesterday night, stating the required conditions imposed by the Hong Kong Exchange before shares of Peace Mark can resume trading again.
Does it mean that Peace Mark will resume trading soon? A few possible reasons came to my mind:
(i) The liquidator of Peace Mark may want to sell Peace Mark listed shell to recover more money?
(ii) Will Sincere Watch be listed under the Peace Mark shell? Currently, Sincere Watch is ring-fenced in the liquidation and is still operating as a business.
It seems like Peace Mark shares, although it is not tradable at the moment, may be worth something in the future, but probably it will not be worth a lot.
