Billionaire Lee Buying Own Stock May Lead to Record Share Sale
Lee Shau-kee, chairman of Henderson Land Development Co., attends a news conference following the company's annual general meeting in Hong Kong, China, on Tuesday, June 1, 2010. Photographer: Timothy O'Rourke/Bloomberg
Billionaire Lee Shau-kee invested HK$10 billion ($1.3 billion) in Henderson Land Development Co. and said he plans further share purchases which may lead to a record for a stock sale by a listed Hong Kong-owned company.
Lee and his family exercised warrants at HK$58 each, a 5.9 percent premium to the latest close, as it wouldn’t be easy to buy the bulk of stock in the market, Henderson said in a statement to the Hong Kong stock exchange late yesterday. Lee and his family have also bought 28.2 million shares since March 18, according to the statement.
The developer stands to raise as much as HK$24.9 billion when all 429 million warrants are converted to shares at the HK$58 price, eclipsing Hang Lung Properties Ltd.’s HK$10.9 billion proceeds from a November placement, the biggest cash call by a Hong Kong-owned company. Companies listed in Hong Kong that have majority shareholders based elsewhere have raised more.
“Lee has been increasing his stake in the company; this is just another similar move,” said Adrian Ngan, a Hong Kong-based analyst at MF Global Holdings Ltd. “The company may need money and that’s why Lee exercised the warrants. That could be for expansion or acquiring sites.”
The stock surged 20 percent since March 17, the day before Lee started buying the stock, more than twice the Hang Seng Index’s gain.
‘Large Retail Following’
“Lee has quite a large retail following and a lot of people do follow what he buys,” said Andrew Sullivan, director of institutional sales at OSK Securities Hong Kong Ltd. “Normally these guys buy the stock when it’s trading around the lows, so there will be a lot of speculation” on the billionaire’s plan for the company, he said before the announcement.
Henderson last closed above HK$58 on Nov. 17. The stock fell 2.1 percent to HK$54.75 at the close in Hong Kong yesterday, compared with HK$45.60, its low for the year, before Lee started buying. The warrants issued last year expire June 1.
“Mr. Lee exercised the warrants as he has confidence in the outlook of the company,” said Bonnie Ngan, a spokeswoman at Henderson. “He will continue to increase his stakes in the company in the next couple of months at reasonable prices.”
Lee owned about two-thirds of the Hong Kong developer before yesterday’s announcement on warrants.
Investors typically exercise warrants when stock values exceed the strike price to profit from the transaction. That means Henderson’s shares need to exceed the HK$58 strike price before the June 1 expiration date to draw investors to exercise their warrants.
Henderson’s net debt-to-equity ratio at the end of last year was 19.4 percent, the highest since 1999. Its cash balance last year fell 44 percent to HK$9.8 billion.
The company was investigated by the government and raided by police last year after sales of its luxury apartments, including one it claimed would have fetched a world record price, fell through.
To contact the reporter on this story: Paul Gordon in Hong Kong at pgordon6@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
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