Pay TV operator i-Cable sinks 30 per cent after investors balk at US$88 million fundraising plan
- Hong Kong’s biggest cable television provider plans to use more than half of the fresh funds for producing and buying programmes and channels
- Controlling shareholders Henry Cheng and David Chui will subscribe to the offer
Shares of Hong Kong’s biggest pay TV provider i-Cable Communications fell as much as 32 per cent in early trading on Monday after it announced plans to raise HK$691.7 million (US$88.3 million) via a rights issue.
I-Cable fell to a low of 12.1 HK cents before rising to 12.6 HK cents at the lunch break. It had closed at 17.7 HK cents on Friday. At the close on Monday, its stock stood at 12.5 HK cents, a decline of 30 per cent since the close on Friday.
The plunge came after the company on Sunday night announced plans to issue 6.35 billion shares, offering one share for every existing share at 10.9 HK cents each – a 38 per cent discount from its last close on Friday.
“The group has been in a state of loss-making in recent years,” i-Cable said in the stock exchange filing. “To enable the group to function properly, the board is of the view that the rights issue is necessary to recapitalise the business to allow sufficient time for the restructuring initiatives to be implemented.”
The pay TV service of i-Cable is run by subsidiary Hong Kong Cable Television, which produces more than 10,000 hours of programming each year. i-Cable also runs an internet and multimedia operation.
More than half of the funds raised, or HK$350 million, will be used to produce or acquire television programmes and channels like news, documentaries and lifestyle. Another HK$140 million will be used for network enhancement over the next 18 months and HK$171 million for working capital, i-Cable said.
Forever Top (Asia), the controlling shareholder of i-Cable which owns 43.2 per cent of the company, has committed to accept the rights offer and will underwrite the portion of shares which the other investors do not want.
This is i-Cable’s first fundraising exercise since Forever Top in April 2017 came to the rescue of the television broadcaster with a cash injection of HK$1 billion after the previous owner The Wharf Holdings refused to pump funds and put it up for sale in mid 2016.
Forever Top is co-owned by a group of investors led by New World Development chairman Henry Cheng Kar-shun, Chow Tai Fook Enterprises, which is owned by the Cheng family and David Chiu Tat-cheong, who is also the chairman of i-Cable. Other investors include Zhao Huan, executive director of mainland technology giant Legend Holdings and Li Sze-lim, chairman of Guangzhou R&F Properties.
“The rights issue will allow the major shareholders to increase their control as the other minority shareholders may not want to subscribe to their portion,” said Louis Tse Ming-kwong, managing director of VC Wealth Management.
“The fundraising should help the company to increase its programming content and upgrade its internet business. But as the television business faces a lot of competition from other media it will still take some time for the company to turnaround its loss-making business.”
Hong Kong’s broadcasters have been struggling to stay on air as emerging entertainment options such as live streaming sites have bitten into traditional media stations, resulting in shrinking advertising revenues.
The cable TV provider’s share price had doubled in September after it reached a deal with China Mobile Hong Kong to allow the mobile company’s users to watch i-Cable programmes.