The rights-issue medicine Pacific Century CyberWorks dished out to the market yesterday was not quite as bitter as some feared but equally, the move, which had been rumoured for several days, was unlikely to light a fire under the unloved Internet and telecommunications stock, according to market watchers. 'I don't think the share price will rally but it will help add some support,' Tung Tai Securities associate director Kenny Tang Sing-hing said. After the market closed debt-burdened CyberWorks said investors could buy 30 new shares at HK$6.50 for each 1,000 they owned. Two bonus warrants would be attached to each rights share with a $7.50 strike price. The stock closed at $6.50 on Friday and was suspended from trading yesterday. CyberWorks also said it would raise up to US$1.3 billion from a convertible bond issue, with chairman Richard Li Tzar-kai taking $500 million and institutional investors the rest. 'I think the share reaction will be quite neutral,' OSK Asia Securities research manager Alex Wong said. 'It's not too bad a deal for minor shareholders but the problem is there is not too much upside either.' Many small investors would not bother to subscribe to the rights issue as they would receive odd numbers of shares which would not add up to full board lots, he said. Some analysts took heart from CyberWorks refusing to offer a discount for the rights shares from its last closing price. Tai Fook Securities research head Marco Mak Tak-kwong said: 'That's a signal to the market that the major shareholders will support the share at this level.' Phillip Securities research director Louis Wong Wai-kit said Mr Li's unusual move to be the underwriter of the rights issue, rather than an investment bank, could also be viewed positively. 'It indicates he is confident the share price will hold at around HK$6.50,' he said. TAL CEF Global Asset Management fund manager Peter Chau Ming-tak said there was even a chance of a rally inspired by short covering as key shareholders seeking to participate in the issue recalled stock they had lent out. Behind yesterday's announcement was a desire by CyberWorks to reduce its hefty borrowings which have been overhanging the stock since its takeover of telecommunications operator Cable & Wireless HKT in August. CyberWorks' debt would be cut from US$9 billion to $5.5 billion through its $3.5 billion alliance with Australian telecommunications operator Telstra Corp. Up to $1.83 billion will be raised by the bond and rights issue, potentially taking the debt to less than $4 billion. Mr Wong said: 'Shareholders of [CyberWorks] have been worried about the debt level and it shows that [CyberWorks] is making an effort to bring that down.' Pacific Challenge Securities research director Alan Hutcheson said with the rights issue out of the way, CyberWorks could participate in a European-led telecommunications-stock renaissance. With CyberWorks near the bottom of a HK$5.60 to $9.40 consensus net asset value range, he rates it a trading buy with a $10 target. 'I've been a bear on this stock for the last nine months because the valuation has been silly,' he said. 'But now it is not silly. It has been massively oversold.' For CyberWorks shares to really move, the company will have to repair its image in the eyes of fund managers. The rights issue is unlikely to do that as it came so quickly after the Telstra announcement on October 14. One fund manager, who sold out of CyberWorks 'months ago', said: 'Having just done the Telstra deal they should have been fine. It is just too early.' CyberWorks' price has fallen 54.86 per cent since September 1 and has seen its Hang Seng Index weighting drop from a peak of 8 per cent in August to 3.8 per cent. That means fund managers can exclude it from their portfolios without straying too far from their benchmarks. Orbitex Investment's Jerome Hass is another manager who has turned his fund into a CyberWorks-free zone. While rights issues were not necessarily bad news for investors, he said the stock's slide was not over yet. 'I think the stock has some more to go before it becomes attractive. There is still too much hype involved,' he said. The core mobile business in Hong Kong was facing too much competition and the cash-burning Network of the World broadband content was an unnecessary 'avant garde' frill, he said. Detractors also see the rights issue as a move from the promise that the acquisition of C&W HKT would provide the cash flow to fund expensive Internet projects. Financial Web site Quamnet said: 'Despite the takeover of HKT, it is already going back to its old ways of issuing more currency via equity placement to finance its dream. Just when you thought it was safe to get back in the water, more share dilution rises up from the deep.'