The Rise and Fall Of Richard Li - Company Financial Information

The Hong Kong entrepreneur pulled off one of the most dazzling takeovers in Asia. Then his business fell apart.

PACIFIC CENTURY CYBERWORKS WAS THE MOST GLAMOROUS Internet story in Asia. It began life as a telco equipment maker. Two years ago Richard Li acquired the company and began building a media colossus. For a while, CyberWorks had cachet, drawing eager investors who drove its market cap to $35 billion. [See "Hong Kong's Boy Wonder," Sept. 25, 2000.] But the company got caught in a market downdraft and wasn't able to deliver on its promises, including a broadband entertainment network. Investors -- most prominently, Cable & Wireless -- lost faith and began dumping their stock, sending the once high-flying shares below $1. Here's a chronology of how Pacific Century CyberWorks came together and quickly fell apart:

MAY 1999 Li pays $315 million for a small telecom equipment company listed on the Hong Kong Stock Exchange and renames it Pacific Century CyberWorks. Li's influential name combined with the Internet mania then gripping Asia propel CyberWorks to a market capitalization of $35 billion. For a moment, Li's controlling stake was more valuable than the $11 billion empire that his father, legendary Hong Kong entrepreneur Li Ka-shing, took 30 years to build. Reporters chase Richard like a rock star.

MARCH 2000 Li raises $1 billion in a secondary stock offering and uses 10-month-old CyberWorks' high-flying shares along with cash to buy Hong Kong Telecom, the city's dominant telephone company, from its British owner, the venerable Cable & Wireless. Valued at $38 billion, the deal is one of the biggest takeovers ever conducted in Asia outside Japan. CyberWorks takes on a staggering $9 billion debt. Cable & Wireless gets a 20 percent stake in CyberWorks, which is trading around $2.80.

AUGUST 2000 A week before the merger is completed, Li personally sells a 1 percent stake in CyberWorks at $2.04 per share and pockets $485 million, recouping his initial investment.

AUGUST 2000 The merger is completed and Li says his company will be second only to AOL Time Warner, largely on the strength of CyberWorks' futuristic Network of the World, a broadband entertainment service. "The company should double in value," Li says.

SEPTEMBER 2000 CyberWorks stumbles when major deals unravel with partners CMGI and Hicks, Muse, Tate & Furst. Cable & Wireless sells 5 percent of the company even though CyberWorks shares have plunged to $1.28. "The stock price doesn't affect our operations, and we do not have any demand for capital in the near term," Li tells the local press.

OCTOBER 2000 To service CyberWorks' $9 billion debt, Li starts selling off the most valuable parts of Hong Kong Telecom -- its regional mobile and IP backbone business. CyberWorks shareholders are now stuck with a stripped-down fixed-line telco. CyberWorks' luster is gone. The Hong Kong press turns on Li. Retail investors curse the company. "Richard Li cheated people," gripes one cab driver. Investment banks suspend research coverage.

DECEMBER 2000 The company cuts spending on its Network of the World. The broadband entertainment project was the centerpiece of Li's Internet ambitions but never got off the ground.

JANUARY 2001 CyberWorks shares dip below 50 cents. Its market cap is now a sickly $12.9 billion, about one-third the original market cap of Hong Kong Telecom.

FEBRUARY 2001 Under the terms of its deal with CyberWorks, Cable & Wireless, which has already unloaded 5 percent of the company, can sell another 7.5 percent on Feb. 17. Li Ka-shing says his companies will not rescue his son by buying shares.

AUG. 17, 2001 Cable & Wireless can sell its final 7.5 percent holding in CyberWorks. Chances are there will be few buyers.

COPYRIGHT 2001 Standard Media International
COPYRIGHT 2001 Gale Group