Celebrities-related Stock Prices May Not Reflect Operation Performance
The term "celebrities-related stock" (明星概念股) has become popular in the market recently as more companies held by entertainment artists are seeking for a listing in Hong Kong. A recent example is Alan Tam's Impact Global Holdings (藝能環球), which is engaged in entertainment and concert organising businesses, has applied for a main board listing last August.
"Celebrities-related stock", which refers to a listed company invested by famous entertainment artists or celebrities. The celebrity effect may lead to a rise in stock price. However, professionals regarded this as a speculative investment since the increase of stock prices may just be a short-lived phenomenon.
One of the well-known examples in Hong Kong is Luen Wong Group Holdings Ltd (08217) held by Wing-wah Wong, the father of famous actress Priscilla Wong. Mr Wong is a major shareholder and was an executive director of the company listed on the GEM board for small and growing companies. On the stock's trading debut on April 12, 2016, the stock price surged more than 18-fold to the day's high of HK$4.8 before closed at HK$4 or over 1400% higher than its offer price of HK$0.26 each. The value of shares held by Mr Wong climbed to an estimated HK$1.87 billion.
Two days after it was listed, trading of Luen Wong had skyrocketed to HK$142,000 per trading lot which was way higher than most blue-chip stocks like Tencent (00700) and CKH Holdings (00001). However, the share price of Luen Wong fell by more than 90 percent from its record high of HK$25.75 in January 2017 to less than HK$1 in mid-2017. Wong has resigned from his job as the executive director since April 2018. The stock price of Luen Wong moved between HK$0.090 and HK$0.340 in the past 52 weeks.
Some retail investors said they would focus on the financial performance and nature of business before they decided whether to invest in a company. While Ms Kam, a 69 years old individual investor said, sometimes, especially on the first trading day of a listed company, she would purchase its shares if their market prices were chased up by other investors. "Because when many people participated in it, which means many people have confidence in it. If celebrities also involved in the company, it was a guarantee to the public."
Mr Tan has been retired and invested in the stock market for more than 10 years. To invest in a business, he would focus on the company's performance rather than its popularity. "I think most individual investors would be attracted by the celebrity effect but ignored the business fundamental of companies," said Tan. He would not invest in stocks just because of the celebrity effect. He elaborated some of his concerns when making an investment decision, for examples the foreground and the price-to-earnings ratio of the company and the market atmosphere.
Chief Executive of Emperio Securities and Assets Management Francis Kwok believed that it was speculation if people invested in celebrity-related stocks without concerning the background and performance of those companies. He also reminded investors that the upsurge of such stocks might disappear within a short period. "Investors are just attracted by the celebrity effect, while it is not a long-lasting situation. Some of these stocks do not have any profit base at all," Kwok added.
Kwok emphasised that investors should consider the investment value of celebrity-related stocks. "It is just a kind of hype. When the stock price is increasing, investors who bought it at a lower price will sell their shares. If there are no new round of investors to undertake the stocks at a high price, the stock must continue to be under pressure."
For example, Mi Ming Mart Holdings (08473) was listed on the GEM board last year, held by a Hong Kong actress and politician Erica Yuen. The stock was 136 times oversubscribed by investors. Besides the celebrity effect, "Mi Ming Mart does have a real business fundamental and continue earning money,” Kwok said. It is different from some other 'celebrities-related stocks' that are in lack of information on what their core business and future planning are, he added.
Darwin Choi, Assistant Professor at the Chinese University of Hong Kong Business School, said celebrities have influences to stock prices because they appear in entertainment news quite often. Meanwhile, he reminded that celebrities might not be professional enough in running a business or improving the cash flow of companies. "Some artists do not involve in the operation of their companies; they will not bring significant results to the cash flow in the long run."
Hong Kong adopts a free market economy and the market regulator Securities and Futures Commission (SFC) would not limit the investment of celebrities even though the business itself was not related to his or her profession, Mr Choi said. "The government keeps educating and reminding small investors to be smart in selecting financial products. I believe that investors will learn from it and be more careful in the future if they experienced serious losses.”
He believed the trend of celebrities-related stocks in Hong Kong was not as common as that in mainland China and Taiwan. Investors should keep an eye on another concepts stock. "Just like the case of China Literature (00772), many small investors were just taking a speculative attitude to invest in it because it is a subsidiary of Tencent (00700)." It is important to investors considering the business nature and potential of a company, he added.
《The Young Financial Post 新報人財經》