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Feeding Frenzy
Internet start-up Tom.com returns Hong Kong to its heady days
By ERIC ELLIS
February 24, 2000
Web posted at 11:15 a.m. Hong Kong time, 10:15 p.m. EST
How short are Hong Kong memories? Miniscule, if this week's mania inside and outside Hong Kong banks is any guide. This was no mad scramble for Hello Kitty memorabilia or Snoopy dolls. No, this was something that spoke to the essential Hong Kong character--money.
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The massive lines lining up all over the city had assembled to get a piece of Tom.com, the brand-new Internet offering from those Titans of Technology (not!) Cheung Kong (it started up from plastic flowers fame) and Hutchison Whampoa, which at least has a couple of mobile phone start-ups under its belt.
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For Hong Kongers, it was a rerun of the frenzy to get a piece of the Red Chip Rally of the mid-'90s, that unseemly rush to get hold of reformist rhetoric in the form of mainland Chinese companies that promised to plumb markets as massive as, well, the Internet. Many were the foreign investment bankers who secured their place in the southern France sun with the bonuses of those heady floats.
Needless to say, the stags made their fast-money profits on the red chips before many of those stocks turned to dust. This happened when rational investors determined that a 1.2 billion population might have been one thing, but 50 years of communist business practices, corruption and an uneven economy and (need I go on) were quite another.
Many of the punters who bought into the red-chip mania are now, to coin an oft-used Internet investment term, "breathing under water," the unpleasant phenomenon of holding stock, or options on stock, worth somewhat less than you anticipated it was worth when you got some.
But I doubt if this sort of assessment was paramount in the minds of those Hong Kong housewives, hawkers and construction workers as they grappled with one another to get a slice of Tom.com. Little matter that most of them had likely never been online, or even had any intention to in the near future. They'd read in their local papers' business section (next to the racing section) that the Internet was some hot thing from somewhere else, that "Superman" Li Ka-shing and his boy Richard seemed to be doing well from it and that was good enough for them.
The result? Likely the most oversubscribed float in Hong Kong history, where SAR money supply will blip with all the cash tied up, and where underwriters BNP Peregrine, led by Francis Leung (now he knows a thing or two about red-chip IPO frenzy, and Indonesian taxi companies) will probably earn as much for Tom.com and themselves from the overnight interest on the billions tied up than on the float proceeds itself. It is tipped to top the 1,276 times oversubscription of the red-chip Beijing Enterprises Holdings in May 1997.
So what does Tom.com do? Nothing much at the moment, except offer an ultra-designed site that promises to offer everything you need to know about China. It's a portal, a would-be Internet gateway with a funky (English) name. But profits are something its principals have said it doesn't want for quite a few years because that would mean it isn't investing enough in other profitless enterprises on its way to the not inconsiderable mission of becoming "China's Time Warner."
The portal wants to "bring Hong Kong to China, and China to Hong Kong." That sounds a lot like China.com, which has made billions for its backers by putting up censored news from the state-owned Xinhua News Agency, and the occasional Sichuan Hot Pot recipe. You won't read about the 1989 Tiananmen Square massacre on China.com and you are unlikely on Tom.com as well.
But, hey, the Internet is good news and at the moment Tom.com has so much of it as to make its backers even more money. Tom.com offered 428 million shares at HK$1.78 ($0.23) each ahead of its March 1 listing on the appropriately named GEM (Growth Enterprise Market) second-board market. But it's anyone's guess what its price will be when it lists. Some estimates have it debuting at HK$20 ($2.56), with liquidity at a premium because of the 10% made available to the public. All of which seems to answer the question I get asked most often--how do you make money on the Internet?
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