HONG KONG (AP) - Hong Kong's securities watchdog is investigating PCCW Ltd.'s chairman after he purchased shares in the fixed-line operator before it announced the takeover of small mobile phone company, Sunday Communications Ltd., a news report said Tuesday.
The Securities and Futures Commission, or SFC, is also probing possible insider trading in shares of Sunday before the takeover was made public Monday, Dow Jones Newswire quoted an unidentified regulatory source as saying.
The SFC declined to comment.
According to a disclosure by Hong Kong's stock exchange, PCCW Chairman Richard Li raised his stake to 26.56 percent from 26.11 percent in the company in 11 transactions since April 6, involving a total of HK$138 million (US$18 million; euro15 million).
A week before PCCW announced its acquisition of Sunday, Li bought 7.69 million PCCW shares for HK$37 million (US$4.7 million; euro3.9 million).
PCCW's Deputy Chairman Jack So said the company has not received any notification from the SFC on any investigation "but if we get anything, we will fully cooperate.''
The unnamed source told Dow Jones the SFC's investigation of Sunday was prompted by a surge in the mobile operator's share price and turnover Friday.
It rose 10 percent to 53 Hong Kong cents on Friday on volume of 39.3 million shares, compared with 5.2 million shares Thursday.
Trading in the stock was suspended Monday, just before the announcement of PCCW's bid."The SFC thinks it has a prima facie case for insider dealing in the case of Sunday,'' the source said.
Sunday declined to comment.
Analysts said the SFC will be hard-pressed to make a case for insider trading by Li, given that PCCW's shares have been fairly flat in the past week and didn't rise following the news of the Sunday purchase.
"The acquisition of Sunday, whose market capitalization is under HK$2 billion (US$256 million; euro212 million) compared with PCCW's HK$32 billion (US$4 billion; euro3.4 billion), won't bring colossal benefits for PCCW,'' said Celestial Securities Asia Research Director Herbert Lau.
David Webb, a private investor and high-profile activist for shareholder rights, said to demonstrate insider dealing the SFC needs to show that Li had price-sensitive information.
"But the impact on PCCW share prices after the announcement has been negligible,'' he said.
On Tuesday, PCCW's shares closed down 1 percent at HK$4.75 (61 U.S. cents; 50 euro cents).
Li is the son of Li Ka-shing, one of Asia's richest businessmen and chairman of conglomerate Hutchison Whampoa Ltd.
Like his father, the younger Li has a penchant for dealmaking, though he has mostly focused on the telecommunications' sector.
Li bought Hong Kong's leading fixed-line operator PCCW Ltd. from the U.K.'s Cable & Wireless PLC in 2002.
PCCW said Monday it would pay HK$1.16 billion (US$149 million; euro123 million) in cash to acquire a 60 percent stake in Sunday. - AP
Did you find this article insightful?