Ugly start for Modern Beauty on share market
Stock drops 9pc on debut as regulator keeps an eye on consumer disputes
Hong Kong Exchanges and Clearing is following the case of newly listed Modern Beauty Salon Holdings' disagreement with the Consumer Council over a discrepancy in the number of customer complaints.
Modern Beauty, which made its trading debut yesterday, tumbled 22 per cent below its offer price of $1 just after the market opened and ended the day 9 per cent lower at 91 cents.
HKEx listing committee chairman Moses Cheng Mo-chi said the stock exchange was following the Modern Beauty case. An HKEx spokesman declined to comment on individual cases yesterday.
Two days before its trading debut, Modern Beauty told the stock exchange that it had been asked by the Consumer Council to explain why the number of complaints reported in its listing prospectus was lower than that recorded on the council's books.
In the prospectus, Modern Beauty said 260 customer complaints were lodged with the council from April 2002 until the end of July last year, while the council said it had drawn 303 complaints to the company's notice.
Mr Cheng rejected criticism that the stock exchange was incompetent in vetting listing applications.
'The stock exchange had strict requirements over company information disclosure and sponsor duties. However, when the listing division vets applications, the focus is on where the company has adequate disclosure instead of verifying the provided information,' he said.
Frankie Hung Fan-kwan, the chief financial officer of Modern Beauty, did not comment directly on whether the stock exchange was looking into the case, only saying the company would co-operate with the regulator and disclose further information if needed.
On the concerns of the Consumer Council about the company's pre-paid beauty packages, Mr Hung said it was a common practice in the industry.
According to Modern Beauty's policy, expired pre-paid beauty packages will be treated as revenue to boost profit. In the past financial year, 55.5 per cent of company profit came from expired packages.
The Consumer Council told the South China Morning Post yesterday that the complaints were mainly over Modern Beauty's service. Others who bought pre-paid coupons said they were unable to make appointments within the coupons' expiry date. 'We are very concerned about the figures because the coupons are the company's main source of profit,' a council spokesman said.