Tough times for Hong Kong’s `super boy’

Some punters feel burned by the recapitalisation plan and have complained on local talk radio. The new offering could eventually dilute their holdings by up to 14 per cent, said an analyst, and will leave investors holding odd share lots.But Li, who holds a 38 per cent PCCW stake, appears to have done better than some investors through the refinancing. In August he sold a one per cent holding in PCCW at HK$ 15.81 a share for US$ 487 million, and under the refinancing will buy back in at HK$ 6.50 a share, potentially boosting his stake to 41%, PCCW said.

“As a minority shareholder, I’d be displeased,†said SG Securities Internet analyst Jonathan Iu, who called it “not a good PR (public relations) move.†Iu added, “people just get a bit disenchanted, disillusioned with Li’s financial reengineering.†Those who know him say Li is sorely disappointed that minority shareholders have suffered, which he blames in part on short-selling by hedge funds.

The refinancing, the company said, is intended to shore-up its balance sheet, which still will carry what PCCW says is a manageable US$4 billion bank debt. PCCW shares have been brutalized by negative sector sentiment, debt, lack of investor confidence in its broadband efforts, and fear Cable & Wireless will dump its 15.3 per cent (pre-dilution) holding. Just months ago, Li seemed to exemplify the most effective traits of both the new and old ways of doing business in Asia.

Like many of his generation, Li was educated in the United States (at Stanford), is techno-literate and saw the unprecedented potential in the Internet economy. In his blue blazer and open-collared shirt, the youthful-looking Li looks every bit the cyber-entrepreneur. But like businessmen of his father’s generation – Li Ka-shing rose from selling plastic flowers to developing land to amassing a vast and diverse corporate empire – Richard Li also knows how to make use of “guanxi,†or connections.

Winning a US$ 12 billion loan in February to help buy Hong Kong’s dominant phone company, for example, was no problem, given the coziness of the local business community and Li’s pedigree.

And in a controversial decision last year the Hong Kong government awarded PCCW, without competitive bid, the right to develop the CyberPort office, retail and residential complex. Li used a loan from his father in 1992 to set up Star TV, Asia’s first broadcast satellite business, then sold it to Rupert Murdoch’s News Corp Ltd for US$950 million. But despite PCCW’s recent problems Li still cuts an almost rock star-like swath in celebrity-mad Hong Kong. Though he is building a mansion away from Hong Kong’s crowds in beachfront Shek O, Li still displays a common touch.