At What Cost? Chow Tai Fook's upcoming IPO is about to make founder Cheng Yu-Tung the world's richest Chinese. But his plan to offer more New World Development shares is irking shareholders.  Photo: Chinese-No1

INVESTORS ARE not known for being big fans of “surprises.”

Stability and steady growth are what we all yearn for when trying to grow our money.

So shareholders were not at all pleased at New World Development’s (HK: 17) latest fundraising scheme, said a Chinese-language piece in Sinafinance.

At the center of the firestorm is the property developer’s chairman, Cheng Yu-Tung, whose Chow Tai Fook jewelry play is set to become the year’s biggest IPO in Hong Kong on December 15.

Not helping matters for New World Development’s shareholders is recent news that the jewelry firm’s listing will push Mr. Cheng over the top, making him the richest Chinese in the world and relegating peer property magnate Li Ka Shing of Cheung Kong Holdings (HK: 1) to second place.

Tycoon Cheng also added some fuel to the fire on Tuesday by refusing to answer questions from the media following a shareholder meeting in which he reportedly did listen to some of the minority stakeholders’ grievances.

Cheng surely fielded complaints on the long-term valuation slump of the developer’s Hong Kong-listed shares, and attempted to justify the real estate firm’s latest plan to issue more shares in yet another fundraising exercise.

Silent Treatment

How the Other Half Lives: Some of New World Development's living options.  Photos: NWD

New World Development’s recent troubles all began late last month when on a single day its share price closed down 18% in a single day – its worst such plummet in 14 years – after the firm announced plans to raise 12.3 bln hkd via new discounted share issues to help finance land bank accretions.

Perhaps most irking to investors was Cheng’s “silent treatment” to the media this week, in particular his refusal to comment on what he thought of the current property market climate in Hong Kong.

However, Chairman Cheng’s elder son – Henry Cheng – did tell media following the annual general meeting that he saw housing prices in the Special Administrative Region falling by up to 10% over the near term as authorities carried on their campaign of introducing new land supplies to the market.

In fact, industry figures released on Friday did indicate that Hong Kong’s home price averages had begun to soften for the first time this year.

When asked by media to offer guidance on where the property market was headed, and what plans New World Development had to meet current and future challenges, Chairman Cheng said: “Ask my eldest son.”

The somewhat dismissive reply was not a welcome development for media and investors, and both will be closely watching the chairman and his property firm’s moves over the next few days to see what, if any, further actions are taken.

See also:

Regime Change: CHOW TAI FOOK Founder To Become Richest Chinese

GREENTOWN Chairman, How Can You Face Shareholders? 

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