Online IPOs Seemed Like a Good Idea �� - Government Activity

In Hong Kong, the Web is getting a tryout at crowd control.

Investors here have a history of hitting the streets in hordes for anything -- from cakes to plastic McDonald's figurines to IPO applications -- that can be bought low and sold higher. But last February was particularly unruly: 300,000 investors converged upon just 10 designated banks to apply to buy shares in the Chinese portal Tom.com, Crowds pushed and shoved, spilling onto streets that eventually had to be closed. As police scrambled for control, one on-duty officer was caught trying to sneak in his own application. While newscasts broadcast the scene around the world, the city's Financial Secretary Donald Tsang expressed his embarrassment, calling it "unthinkable" for such chaos to occur in Hong Kong.

"Any way to alleviate this would be good," says Ben Dunn, manager of personal e-business at the Hongkong & Shanghai Banking Corp.

So the city tried a new approach to keep Hong Kong's competitive investors in check -- and off the streets. When the government took part of its underground railway company public last fall in a massive $1.2 billion IPO, Hong Kong trumpeted its first electronic offering. Banks and brokers splashed full-page ads in major newspapers and advertised online, promising investors a small rebate if they used the Internet to apply for shares in the Mass Transit Railway Corp.

But the e-IPO was beset with problems. The issuer accidentally sent out more than 1,500 duplicate share certificates. One site stopped taking applications a full day before the offering so that typists would have time to create hard copies and pass them on to a broker, And applicants who braved the process didn't escape the usual offline hassles: They still had to submit signatures and receive their share certificates by regular mail.

Indeed, by most measures, the online offering was a failure. Though the city's largest bank, HSBC, attracted twice as many online subscriptions as it claims it had expected, in all, less than 10 percent of the total applications were taken over the Net.

"It will take longer for [online offerings] to reach a broader population and for more investors to adapt," says Kelvin Lee, head of the Hong Kong Exchanges and Clearing.

But who's going to prompt that change? Months after the first online offering, no one's clamoring for a second experiment in the new medium. As of December, none of the companies that had gone public since Mass Transit -- nor any of the 33 approved for offering -- had requested the e-IPO treatment. There are no mobs storming Hong Kong's Net.

COPYRIGHT 2001 Standard Media International
COPYRIGHT 2001 Gale Group