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Case
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Reference no. 201-029-1
Published by: Asia Case Research Centre, The University of Hong Kong
Published in: 2001

Abstract

On 18 February 2000, month-old Internet startup, Tom.com, began its initial public offering and would open for trading on 1 March on Hong Kong''s Growth Enterprise Market. The Internet company, majority-owned by Mr Li Ka-shing''s Cheung Kong Holdings and Hutchison Whampoa, planned to catch the frenzy that Hong Kong''s investors had for new Internet stocks. The huge demand for Tom.com shares raised Internet frenzy in Hong Kong to new levels reminiscent of the red chip fever of 1997. Many of the retail investors had no idea what the company did but were betting on the IPO being a winner largely because of Mr Li''s clout with China. In this case, the student is asked to serve as an investment adviser to a retail investor considering subscribing to Tom.com''s IPO. The student will provide an analysis of the risks and opportunities of investing in Tom.com and make a recommendation on whether the client should buy Tom.com''s shares at the offer price. The case is intended to highlight the complexity of pricing Internet stocks that rarely have much of a track record for investors to study and the irrational investing behaviour of Hong Kong''s small investors.
Location:
Industry:
Other setting(s):
2000

About

Abstract

On 18 February 2000, month-old Internet startup, Tom.com, began its initial public offering and would open for trading on 1 March on Hong Kong''s Growth Enterprise Market. The Internet company, majority-owned by Mr Li Ka-shing''s Cheung Kong Holdings and Hutchison Whampoa, planned to catch the frenzy that Hong Kong''s investors had for new Internet stocks. The huge demand for Tom.com shares raised Internet frenzy in Hong Kong to new levels reminiscent of the red chip fever of 1997. Many of the retail investors had no idea what the company did but were betting on the IPO being a winner largely because of Mr Li''s clout with China. In this case, the student is asked to serve as an investment adviser to a retail investor considering subscribing to Tom.com''s IPO. The student will provide an analysis of the risks and opportunities of investing in Tom.com and make a recommendation on whether the client should buy Tom.com''s shares at the offer price. The case is intended to highlight the complexity of pricing Internet stocks that rarely have much of a track record for investors to study and the irrational investing behaviour of Hong Kong''s small investors.

Settings

Location:
Industry:
Other setting(s):
2000

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