一名龙筹企业总裁的自白
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THE CONFESSION OF AN S-CHIP CEO We are victims as well!!!
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Let me tell you the story. By the time you read this article, it would reached have hundreds of investors, bankers, regulators and journalists. My purpose was to shed some light on the “dark sides” of the business of S-Chips (Chinese companies listed on Singapore Stock Exchange), so as to help prevent more financial losses in the future hurting the ordinary people on the street. From this angle, I wish to redeem myself somewhat.........
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It all started some 6-7 years ago. My colleagues and I were just a few of the million of entrepreneurs in China struggling to make ends meet at the textile fibre factory that we bought from the government. Some of our older colleagues had laboured for more than 20 years before having the chance to “privatise” the state-owned textile fibre factory in Fujian Province that we have worked for since the day we left school under the Premier Zhu’s “government retreat, private sector advance” scheme, literally at a song. We thought we were going to be very rich very soon. Little we knew that when the local governments of the various counties and villages decided to “retreat”, we end up! with thousands of “privately-owned” textile fibre spinners that competed ever more aggressively. Despite ever rising revenue, margins were disappearing fast....... Sometime, we just wonder why we have worked so hard only to earn next to nothing. Perhaps, our only reward was meant to be “the master of our own destinies”...... But we never really gave up hope...... One day, we shall strike gold.......
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1990, the year after the TianAnMen Incident, was really a very difficult year. Many of our clients, the textile manufacturers who were enjoying the initial euphoria of the burgeoning export demand, went belly-up within a short 2 years of economic contraction. However, we pulled through all the vanishing receivables and anguish cashflow-balancing exercises.
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By 1993, we were off for the biggest boom ride of our life-time. Our textile fibre business blossomed as China becomes the clothing factory of the world, benefiting not least from the one-off Renminbi devaluation that the Chinese government engineered in 1994. Those were the good old days, where sufficient numbers of our competitors were eliminated by the TianAnMen-induced recession, and the world began to look to China for every piece of garments stretching from the heads to toes.
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Money was easy......and we expanded our production capacity as quickly as we could, limited only by the fact that the state-owned banks were not really very keen to lend money to private enterprises like ours, and we just have to borrow from our villagers at some 15% interest rates!!! Nevertheless, we did good business and our leader, the general manager of the factory, could even afford a chaffer-driven Santana. In any case, he was too old to learn new trick, even as simple as driving itself. I was the rising star which had to bide my time, as I was the only person who speaks decent English. I was meant to be the tongue of the company in dealing with the external world. But I am getting impatient. For while the company was booking increasing profits, we never seems to have cash to be distributed as any excess cash generated from the business was never enough to cover the capital expenditure needed to expand the production .
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We just owned an ever-growing production business. Unfortunately, good profit margins never last in China. Good demand quickly attracted new entrants into the business as the barrier of entry is relatively low. At the same time, some of the so called “obsolete capacities” came back from the grave and soon, we found ourselves struggling to churn our profit. It was like working for free again......lots of revenues but just no profit!!!
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By the middle of 1990’s, we were doing great business selling to our customers in different areas of the coastal areas. In 1995, we suddenly found ourselves having to deal with fast rising cost pressure. However, the market was buoyant enough for us to raise our product prices to pass on the cost increase to our customers. Then, we realized that we must move ahead in term of technology and product offering. Like everyone else around us, we took advantage of the tax concession offered by the government to the so-called joint venture companies. We recycled our “cash” to Hong Kong, set up a “foreign company”, which in turn pumped back the cash to Fujian in the form of a joint venture entity, using the cash to purchase some second-hand German equipment to produce the chemical fibre! s needed in all kinds of fabrics and artificial leathers.
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However, luck did not really favour us, at least thus far. Soon, we were told that our economy was experiencing very high inflation rates and soon, the then Premier Zhu Rongji stepped a hard brake on the economy, cutting the bank credit to many state-owned enterprises which were producing things that no consumers wanted. While as private enterprise we did not enjoy the benefit of bank credit, its sudden massive contraction hurt us as bad as the state-owned enterprises who received such reckless loans. We were entangled like the other enterprises in what we called the “triangular debt” problem, where everyone owes the next person money and there was just no money at the source for anyone to get paid.......!!! The situation last for quite sometime as we lived from hands to mouths, sometimes having to send out local thugs to chase for receivable payments from cash-strapped clients. Then again, what else can we do? We had so much or our friends’ and relatives’ money with us investing in all these machinery now that the only road for us is to struggle forwards......turning back would have made us the “outcast” of the village....... By the time the rest of the Asian economies cracked in 1997 amidst the so called Asian Financial Crisis, we were already becoming numb to bad news. I remembered there were days that I wished I had not joined the textile industry, or any industry at all......for making money out of making something is so darn difficult....... I thought I might have just wasted my youth. Somehow, we managed to pull through as a group. The general manager of the factory, who is now getting seriously old, made his sacrifice along the way by selling his Santana in order to keep more mouths fed. We all had no where else to turn to but to continue pushing hard to sell our new product, the chemical fibres.
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Finally, by year 2000, the economy began to recover. Our hard work and persistence were also beginning to get paid off handsomely as China had become the centre of all textile, shoe and furniture manufacturing in the world, and all these products required some forms of chemical fibres. We were beginning to rake in cash beginning 2002!
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Then my life-changing incident took place. One fine day in late 2002, I was introduced over the dinner table to one Singapore “Deal-maker” who was to become one of the richest men in his country in the next 5 years. Mr D was still a “relatively” poor deal-maker at that time. Just like many so called “deal-makers” running around China at that time, they hope to make small fees introducing companies to capital, or vice versa. Mr D claimed that he had successfully engineered a number of private equity transactions in China, helping companies with so called “mezzanine” financing to prepare the companies to be listed in stock exc! hanges outside of China. He was fully aware of the psychology of Chinese entrepreneurs and their deep dissatisfaction with the bias of the Chinese government in allowing only state-owned enterprises to list on the local stock exchanges. To us, having a listing status in China is like having acquired the right to print money. One just has to cook up a nice investment story and he could get Chinese investors to subscribe to the right issues of a listed company at any price. It was so much more an elegant way to make some money, rather than to have to toil for a few cents selling chemical fibres....... Mr D went further to claim that he had taken some of the invested companies public in both Hong Kong and Singapore Stock Exchanges and given his investors had made some money, he always have a group of ready-investors willing to back all his “stock picks”. He went on to ask quite a number of detailed questions on the operating conditions of our companies over the dinner, jotted them down carefully on a small note book along the way. Later on, we adjourned up-stair the restaurant for a KTV session. I must admit that I remembered clearly Mr D was a good Chinese song singer, having sung some hot-off-the-chart songs that I heard my niece hummed sometime shortly before the incident. His smooth handling of the KTV girls, which he asked for two concurrently, also showed that he had been around.........
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The next time I met Mr D was three months later, quite unexpectedly as I had thought he could have decided to give our company a miss given our relative small size. He requested for a factory visit which, after having consulted our old general manager, I accompanied throughout. As usual, no serious business until after dinner and getting slight tipsy after a few drinks forced down by the KTV girls in the evening. I must admit that Mr D is a seasoned operator. He was quick to recognise that I was an impatient young man to take over the operation from my older colleagues. Throughout the entire evening, he was trying to convince me to move the gear one notch faster to accept some private investors into the company, beyond which he was confident to help us to get the company listed in one of the foreign stock exchanges, where everyone will be able to cash out their profit if they so ! chose. I pretended to be sceptical while deep in my heart, I need no convincing as I have known many Fujian entrepreneurs shot to fame and riches, 2 of them by turning large tracts of collective land into vegetable farms and the other bending float glasses he bought from state-owned factories into auto wind-screens and sell them to car manufacturers. I never doubted that one can make a lot of money from car wind-screen, but I could have never imagined striking it rich planting vegetable.......!!!
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Mr D and myself both agreed later that we need to convince the other older colleagues of mine to approve such a scheme, and over time, move them aside to allow someone young and dynamic person like myself to be the face of the firm to cater to the likings of the investors, who were mostly English speaking. In the meantime, my task was to convince the existing shareholders to allow a group of Mr D’s friends into the shareholding first, while paying Mr D a “structuring and introduction” fee along the way. The easy part was, as Mr D coached me on how to present to the rest of the shareholders, his fees will not be in “cash” but rather in equivalent value of “shares”. He said that was to assure everyone that he could only make money should he be able to engineer an eventual listing of the company on a stock exchange, after another year of lock-up period for promoter shares aft! er listing. All interests would be aligned, as he put it.
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Mr D was indeed an experienced operator. He had anticipated all the concerns of the “older” colleagues of mine, who feared that this was another one of those “leather-bag-company” deal-makers that was trying to make money out of no commitment. So he got through the first “hurdle of trust” after my carefully orchestrated presentation to the “board” of the company.
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However, there was still one important issue we could not resolve amongst the board members. The finance manager correctly pointed out that the company indeed, did not need substantial amount of cash at this moment as we were not expanding aggressively anymore. The market place for our products was relatively stable right now with demand and supply growing organically. We will not be able to drive higher sales without sacrificing our margins by cutting prices. In short, we can only grow organically at around 10% ! per annum, which was probably not the most exciting story for the investors. In fact, the board members did not see the need for new capital. However, the idea of getting listed did appeal to them. They too had many friend who had become “paper millionaire” after the companies got listed. They too were looking for the big-pay-off day. So I was tasked to come up with a solution. In other words, there was a “green-light”! I did not expect my luck! Almost immediately after the board meeting, I called Mr D to tell him the outcome, as well as the issues raised. Again, I thought he must have expected the outcomes. As he explained calmly over the phone, the first round investors (which he called angels) will not put in a lot of money so that they would not dilute the existing shareholders very much. These angels are the “connected persons” that will come in with their own money (through Mr D’s personal vehicle) that will help cement the way for some of the well known direct-investment funds to step in at a slightly later stage, which would provide the company with the credibility, other than funding, to convince the stock exchanges to allow the company’s listing, and the subsequent active participation of other institutional investors during the IPO. Mr D went on to explain that the process of getting a Chinese company list! ed was in fact, an art. There were not many people like him that could have the trust of many influential people to conceal their names behind his vehicle to invest in a company, not unless they have been working on other cases together before and having developed deep working relationship. These angels will see the company through the process from getting “restructured” to “listed”, rendering their helps in one way or another through exerting subtle influences on counter-parties, bankers, regulators and other investors. Mr D’s vehicle will participate in the shareholding of the company first, where they will invest up to 5% at book value. In other words, they demand for very cheap entry. Mr D will only take his fees later after having brought in the money from direct investment funds, in larger quantum, in the form of shares of the company at book value before the entry of new capital. He wanted 2% worth of the amount of money he would bring in from the funds in such shares. Subsequently, he went on to explain that this was the modus operandi these days as he could introduce us to the senior executives of the companies who had done business with him for further due diligence on his reputation. In particular, he emphasized that my colleagues should not be worried at all given the fact that it was going to be his and his friends’ money that will be in their hands, rather than the other way round. My older colleagues did find some solace in this argument later on.
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As for the use of money, Mr D simply pointed out that we will have 6 month to a year to come up with a new plan on spending the proceed of investment, in the form of new technology and new products. “Aren’t you guys always looking for money to upgrade production machinery to produce new stuff for the market? It the same bunch of the customers anyway......”, so he quipped. So the decision process took a few months, where in between, Mr D sent in some accountants and lawyer to conduct some checks on our operation and accounts. We had nothing to hide then as we had no reason to fake anything. Everything was ours.......then. Subsequently, the “angels” came in, followed by, indeed, a number of reputable direct investment funds a few months down the line. We got a whopping US$20mn to put up a new plant to produce a new type of artificial fibre, the machinery of which was to be imported from Germany. The new product was in fact, attractive to a lot of customers. However, none of them were going to buy a lot of it at the beginning as they were not sure their customers were going to like the new types of yarns made of this new fibres. Business was not as brisk as Mr D had! hoped for.......
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On the other hands, Mr D seemed quite keen that we could move forward in our listing process. He began to educate us the process and requirement of the stock exchanges for listing. We paid visit to Hong Kong and Singapore, talking to bankers and exchange officials, attending seminars, as organised by Mr D. We were all psyched up to be a rich millionaire once the company is listed. However, there was just this little problem.....our new products were not accepted by the market as fast as we had wished for. Most of our customers operate under very tight cash flow situation. They only have working capital to provide for the acquisition of raw materials to produce the yarns ordered by their customers. No one was going to spend a lot of money buying our new fibres, prod! uce large quantity of products to purvey them in trade shows, despite they all fed back with good comment on the potential of the new fibres. Very quickly, Mr D came up with an idea. In order to boost our sales numbers fast, he will raise another US$20mn of money from all the direct investment funds in the name of working capital need. As he explained, they often did the same tricks with those companies they listed before. They will raise new capital to produce the new products to sell to customers, encouraging them to help push the new products by offering them more favourable and longer payment terms. With the increased sales and profitability number, he could get the company to list very quickly to get more money to help push for more sales....... He claimed he had done it many times before and it had always worked out. The economy was recovering quickly in 2003, nothing was to going to go terribly wrong. When I asked whether that would be considered “artificially inflating sales number”, he laughed and quipped, with the capital markets on your side, you can engineer self-fulfilling prophesies!” Of course, this article cannot be complete, at this juncture, without citing Mr D’s favourite quotable quote. “Water enough money into any company, even a fake one could become real some day.” He believed so much in this that I thought one day, this could cause his downfall. So we went ahead, sold the new shares at higher valuation to another bunch of investors Mr D arranged. He took another round of commission in the form of shares. We were beginning to admire Mr D. Money flows through his hands like water and he did it so effortlessly.
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We were no less impressed by his connection to some of the richest and most influential people, particularly in Singapore. You see, he was viewed as a successful Singapore entrepreneur made good in the vast land of the North. Through diligence and perseverance, he carved a niche for himself identifying promising Chinese companies to groom for listing on the Singapore Stock Exchange which was losing out in race to Hong Kong Stock Exchange as the Chinese! state-owned enterprises were encouraged to list in Hong Kong. Mr D was their hero, directing promising private Chinese enterprises to list in Singapore and along the way, enriching many “angels” and local investment banks in Singapore. I chanced upon many of these angels as well.
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There were occasions Mr D would have called me to help arrange for some transport and accommodation in Xiamen for groups for “secret” visitors. They are usually small groups of 4-8 people. I would generally put them in comfortable Buick mini vans, receiving them from the airports, ferrying them to golf courses, restaurants and night clubs. They would usually visit one of two factories invested by Mr D. From my impression, these were the angels behind Mr D, which for obvious reasons, he had to please. There were bankers, lawyers, other deal makers, stock brokers, fund managers and people that do not have a job, simply because they were so rich already. Occasionally, there were ex-CEOs or Chairmen of large government controlled enterprises in Singapore. Once, I even met a supposedly ex-member of parliament in Singapore.
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It was obvious to me that Mr D entertained them in separate groups at separate times, taking pains in ensuring that some of them were not aware of the involvement of the others, for some reasons. I was always invited to all these golf and night entertainment events for a simple reason: I speak English and Mr D wanted to be seen as having someone like me to watch over his investment in this part of the world and helped him to tap into different kinds of local relationship. The other Chinese entrepreneurs may not be comfortable in dealing with the whole bunch of English speaking Singaporeans.
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One common trait of all these trips was that all these guys from Singapore seemed to love the night clubs in China. The daily programme always ended in some night clubs, where these guys would party till the wee hours, every night they were there. Mr D would sometime, when he was half drunk, tell me that he had again “nailed” some key relationship and one of the travellers in the group would soon be in his “Club”. He would whispered that someone in the group was the senior partner of an investment fund, or someone in another group was connected to the so-and-so in Singapore, or someone was closely associated with the chiefs of some Singapore banks, or someone had “influence” over the listing approval process of the stock exchange, and some would just be some new investors that he was trying to woo to invest in his pre-IPO projects or the shares in the companies that he sponsored the IPOs.
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When I asked why they were all so tireless in their nocturnal activities, Mr D laughed, “This is what I call pent-up demand. You know these people cannot even come 100-meter close to any KTV in Singapore because of their social status. The opening up of China is probably the best thing that happened to all these Singaporean men, for they can at least release their “valves” once in a while........ Do you know how boring Singapore is? I have a permanent KTV room booked up in one of most posh KTV in Singapore, costing me half a mill ion Dollar at the minimum every year. Guess what, the only important guests I have using that rooms are from China!” Watching Mr D in action, I finally understood the true meaning of “club”. He had managed to combine the “social club of friends” and KTV clubs so well that I thought every successful Chinese businessman should learn. And in so many ways, the “club” in Singapore is really not that different from the “club” in China........ So finally, we got our act together to attempt a listing towards the end of 2003, after much of the financial twisting and engineering to make our company look like a well-funded high-tech textile fibre company on the verge of experiencing explosive sales take-off. In truth, we produced a lot of the new fibre products and literally give them to our customer to produce new fabric for marketing purposes, with the promise that we will not collect money until their products are sold. Nevertheless, we book these as receivables.
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To the dismay of Mr D, my older colleagues had insisted on listing the company on the Hong Kong Stock Exchange, rather than the Singapore one, where Mr D has greater control on the process. They felt that the company would probably be accorded higher valuation in Hong Kong. Besides, they were not comfortable with Mr D’s influence in Singapore fearing the ultimate loss of the control of their company. Mr D went along grudgingly, helping to smooth the way to facilitate the IPO. We got a small investment bank to underwrite the IPO. The big ones were really not interested in this small piece of business. We went on to file the application to list to Hong Kong Stock Exchange, who was equally high-handed as Hong Kong was flushed with quality large size state-owned enterprises queuing up to list there. Being relatively uninterested in small size listing and more experienced in evaluating the quality of smaller Chinese private enterprises, they were quick to notice the sudden expansion of account receivables on our accounting statements. They followed up with a number of questions with the clear purpose of delaying our listing, probably to see how these receivables will behave given longer period of time. In short, there would be no quick IPO for us.
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Mr D was quick to use this delay to his advantage. He hinted to everyone on the company board was that one of the reason for the stock exchange delay was due to the lack of a convincing younger manager helming the company, and that our senior colleague was already too old to project a “dynamic” image to the Exchange and the investors subsequently. He wanted me to be promoted to the CEO position while our existing GM to become the Chairman of the board. With his insistence, my appointment was pushed through the board, which made one of my older colleagues very angry as he was supposed to be the next-in-line in seniority. But heck, he should have spent some time learning English! Mr D, being truly worried about the age of the receivables on our book that would become increasingly dubious as days go by, pushed us to shoot for a Singapore listing where he feel, with his broad relationship will help a smooth IPO. This time round, my older colleagues obliged grudgingly. So we quickly filed an application to list in Singapore. It proceeded relatively smoothly and we went through an initial hearing very quickly. The market was in relatively stable conditions and we felt we could get the IPO proceeds quickly at the turn of the year. With lot of money, like Mr D’s famous words, a fake company can become real....... To be fair, ours was not really a fake company. We were just doing what the Chinese proverb describes: Accelerating the growth of the seedling by pulling it up a little everyday...... To our surprise, we got a letter very soon from the stock exchange questioning us the reason for the failure to disclose to them we had applied to the Hong Kong Stock Exchange earlier. They asked whether we had been rejected previously and on what ground we had been rejected. Just as we wonder how they found out so quickly since one could safely assume due to competitive relationship, these exchanges should not be talking to each other on micro matters like this, Mr D came storming in over-night. “Someone wrote a poison letter to the stock exchange”, so he explained. “Someone who knows the situation very well and who is not very happy with the whole thing”, he concluded. We were fortunate, he went on to exclaim, as he felt that given the Hong Kong Stock Exchange never really rejected our application, he could still salvage the situation using his relationship and influence. While there was no hard evidence, we nevertheless took the precaution of asking for the early retirement of the senior colleague who was passed over for the post of CEO as we suspected him to be the whistle-blower. We made sure he was well compensated in monetary terms as we thought that would sooth his anger, with promises to allocate more of the shares to him so that he would share our desire to see a successful IPO. Then we went on to reply to the stock exchange disclaiming the fact that we were previously rejected, citing our need to access capital markets fast as ours business was expanding rapidly. Hong Kong was just going to be too long a wait for us.
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On the other hand, Mr D worked his network and “club of friends” to sooth the nerves of the exchange officials, who were working hard to promote Singapore as the “second board for China” The launch of “second board of China in Shenzhen” hit a snag when the National Peoples’ Congress decided that the Chinese investment public was still too unsophisticated to handle investing in non-State-controlled enterprises that even the Chinese government may not be able to police effectively. So after 3 month, we were informed that we manage to secure the final hearing. Mr D and some young lawyers and accountants spent a few days preparing me to handle the questions “correctly”. I saw the signs of satisfaction on the faces of the officials during the hearing. One of them even went on to comment on the fluency of my English...... Mr D was right again. My Chairman could have fumbled and rumbled on just like any other Chinese CEO during such occasions. They were just the hardworking mulls that built the foundation of the Chinese’s manufacturing might. I belong to the generation that would take the company to soar higher as we understand and speak the language of high-finance, in English! The battle to IPO was hard won. We got listed in 2004 and to our pleasant surprise, some of our customers came back to pay down the receivables and asked for more of our new chemical fibres. By now, China has become the “factory of the World” that churned out all kinds of consumer and industrial products so cheaply that the Americans and the Europeans were so addicted to. The stock markets and physical property markets in the world were becoming buoyant and everyone was beginning to feel wealthy and began to spend more. Our new fibre products found more commercial uses and we bought more machines using the IPO proceeds to produce more products to cater to the booming demand.
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Again Mr D was right. Pour more cash into the business and you will get a real company.........just like the pig-farmers l! isted on the stock exchange.......as he put it. Sensing potential to make a lot of money out of the good performance of the company and the buoyant market conditions, Mr D descended into town one day and asked me out for a dinner. As usual, we headed to his favourite KTV after dinner. After a few drinks, he leaned over and whispered to me, “Hey, this is your chance to grow really big very fast. The IPO proceed was not enough to fund your growth. Now that we are listed, we can place more shares out to raise more money to accelerate the business expansion to capture more customers before the competitors in China could replicate our capabilities, which always happen in every industry and business in China.” I was reluctant to agree to help sell the idea to my old! er colleagues as their shares were still in lock-up period and I imagined they would hate to see any dilution of their interests further at this juncture. Mr D went on, “I really needed your help as I need to get the shares placed out to some of those who helped us through the difficult times just not too long ago. We need to let them make some money as we are entering a bull market soon. In any case, the issuance of more new shares will give us more power to cement your position as the number one man in your company as we all support you rather than your older colleagues.” As usual, we kind of half forced the issue through the board with my older colleagues grudgingly approved some kind of convertible issue to assuage their fear that the new institutional investor would not be able to sell before they were allowed to.
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In Mr D’s effort to consolidate his hold of the board further, a new director from the institutional investor group was appointed to the board. I had known him earlier as one of those that visited our plant before the IPO, when Mr D was just beginning to restructure the company shareholding where this new director was once introduced to me as an “angel” investor. Apparently, they were good friends that “make money together”. By 2005, the Chinese economy had entered into another “boom era” and our business was literally flying, just like any other businesses in China. Profit margins were good while sales expanded quickly, and our share prices rose more than 3 to 4 times from the IPO price. Many of older colleagues sold their shares and retired happily into the sunset in 2006, only to regret to see the shares they sold almost doubled again in 2007. Being the new helmsman, I could not easily sell my shares as it would have been construed as management not having confidence in the business. By then, Mr D had become one of the richest men in Singapore. Leveraging on his experience and the capital he accumulated from earlier successful IPOs he conducted, where in some case he made more than 50 times his capital, he exploited his new reputation as the “preferred deal-maker in Singapore” to the maximum. His “club” became increasingly larger as many people with money and “influence” joined the “club” to participate in this unprecedented “Chinese feast”. He doled out hot IPO share allocation through investment banks to repay old favour and to cultivate new relationship. Success begets success and money begets money. It all seemed so easy and so natural. Everyone got what they wanted. The Chinese companies got their money to expand their business (which at a later stage, no one is really sure which company really had any business to start with), the entrepreneurs were handsomely rewarded for the risks they undertook, the deal makers got their fees, the angels made their killings, the bankers collected their fees and dished out new loans, the lawyers and accountants recruited more young graduates to cope with the record work volume, the stock exchange got their “new mandate as the second board of the Chinese companies”, the investors got their hot-and-sizzling China concept stocks and above all, the rich and the influential members of the “invisible clubs” were all happily enriching their own pockets......
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The reason why Mr D was successful, I realised, was that he always try to help the people who helped him in one way or another to become richer. Despite the fact that I could not sell my shares, I got the help of one of his banker friends to obtain some financing by securing my stake in the company to join in the biggest “Chinese feast in Singapore”. Just like all the Chinese entrepreneurs Mr D helped, I became one of his “angel investors”, taking stakes in promising new companies through his vehicles, got allocated hot IPO shares and reaped substantial gains within short span of time. I too, was becoming not only asset, but also cash rich. I took advantage of the Singapore immigration rule and got myself a per! manent resident by purchasing a property in Singapore. I wanted my son to study in the English school in Singapore and grow up as part of the establishment there. In any case, I would be able to help him join the “club” and he will be taken care of the rest of his life.
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As for Mr D, he was purchasing properties in the form of “tracts of land” as he moved to diversify his assets from stock holdings to land holdings, with a sight to become a serious property developer. The Singapore property market was getting sizzling hot by the middle of 2007 and it seemed nothing could go wrong, particularly when 2 casinos were being constructed in an otherwise very conservative society. For myself, Mr D was going to be my role model. I went on to fund entrepreneurs and Chinese companies directly, hoping one day to bring these companies to someone like Mr D, and make more than the Singaporean deal-maker, at least equal........ Oh, I forgot to mention that the Chinese local stock market went through the roof as well. To take advantage of this, I needed no advice from Mr D. My friends in the local banks helped me secure the capital easily just like what they did for thousands of state-owned enterprise officials. They took the company’s cash as “invisible lien” to lend money to the managers of these companies to punt in the stock markets. The profits of such stock market speculation go directly into the pocket of the managers.
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However, only in hindsight after the stock market collapse at the end of 2007 that it became obvious a lot of Chinese companies’ cash in the bank vanished into thin-air alongside the stock market bubbles. Our worlds began to unravel at the end of the third quarter of 2007. By then, the Sub-prime Crisis, as we knew it now, had hit the U.S. economy. We were still busy feasting in the spoilt of the capital market excesses, unaware of the impacts of such a crisis that originated from the housing bubbles in a country so far away. We were blind-sighted by the ease of making money from stock markets and at the peak of the markets in the middle of 2007, we all felt like the “masters of the universe”.
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The first sign of trouble amongst the Singapore listed Chinese companies appeared when the share price of a Chinese steel company got sold off aggressively. In good times amidst a vibrant economy, this company presented to the investing community a story of their ability to turn in good profit margins by buying hot-rolled steel coils, coating them in zinc and sell them to car and consumer durable makers. One analyst, whom everyone ignored when the stock prices were rocketing, did question its business model as firstly, such production method is highly inefficient as most modern steel mills produce zinc-coated plates in one continuous process, and secondly, the investing world also knew that the prices of hot-rolled coils became excessively expensive as there was a preponderance of such downstream ! processing plants who got squeezed by the few integrated steel giants who have the capability to smelt iron-ore. Then there was the rumour of the company being privatised by a foreign steel giant seeking easy entry into the China market and its stock prices shot up before the trading of this steel company was suspended one day.
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Rumour had it that it had been reporting fake profits, an official report of which the investing community is still awaiting after a few months. It was so obvious an insider job to cash out their position to the retail investors and apparently, the company management was not contactable anymore! By the second half of 2008, I believed many Chinese company CEOs were having tough times struggling to keep their business afloat amidst the most serious and swift crisis in memory as the credit situations around the world got frozen up. Worst, many of us were facing more serious issues in our personal finances. All our investments in stock and property markets were plunging in values amidst the so-called sub-prime crisis. Worse, we could not sell our stocks and properties as the transaction volume of these investments just vanished quickly together with the confidence of the investors globally.
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While we busy feasted in the spoilt of the capital market excesses over the last 2 years, we did not realise that we were piling on quite a fair bit of leverages as we secured our investments for more bank loans to attempt to reap more profits, when it all seemed so easy. We never thought we could have any problem of repaying any of our borrowing as we were sitting on a lot of gains on our investment holdings. There was only one easy way out for all the Chinese company CEOs and that was to dip into the honey jugs. We all understood the importance of having our closest allies to be the finance managers of our companies so that any small “problems” could always be ironed out. In this case, I just “borrowed” some cash from the company accounts to fill some of the “margin calls” from the banks outside of China, which financed my “investments” in the stocks listed on Singapore Stock Exchange, as these foreign banks were ruthless in coming to seize the underlying security when the “margin calls” were not met. In some cases, I just pledged more of my personal assets to the foreign banks. I was becoming very stressed by all these happening and was not sleeping well.
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Mr D was not having a good time either. He too was suffering from exactly the same problems as we were just emulating his investment styles and leveraging activities. I heard of incidents where he turned to some of other more cash-rich companies that he invested in to “borrow” some cash to bridge through some “margin calls”. He sold down quite a fair bit of his investment holdings to some “friendly hands” in a series of stock placements. At this moment, the goodwill and friendship he built over the years came to his rescue in these moments of “illiquidity” as the market transaction volume just dried up almost completely. However, the market prices of the stock holdings we used to secure our financing continued to drop by the days. Some of our friends and fellow “angels” were selling their holdings........and may just be in the same kinds of troubles as well. No one trus! ted each others at moments like these. Those that were selling their investments would not pre-warn their “fellow investors” as everyone would rush to sell at the same time! It was a time where everyone was for himself! My anguish did not escape the attention of the “director” on our board that Mr D posted in earlier. He flew over one day and was visibly concerned about the situation of my finances and of course, more importantly, that of the company. He sensed troubles as he knew that I too, had quite a fair bit of personal investments that were vanishing into the thin air in values.
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By now, at the end of 2008, I was becoming desperate. Our company was going into the “audit season” and obviously, there was a large cash deficit that we would not be able to explain to the auditor. In the past, we could have just “arranged” for some cash to be credited into the bank account for a brief period to satisfy the auditors’ check. However, there was no such “temporary cash” to be found at any price as the sub-prime crisis had now developed into a full blown credit-crisis around the world. China was not spared in the process. With no where to turn to and the audit dateline closing in, I took the risks to “brief” the director of the true situation and asked for his help. I was surprised that he was not shocked by my confession. He had probably guessed it! In any case, the director asked me to remain calm while he would consult Mr D to seek some kinds of new financing to help bridge this difficult period. He asked that everything remained confidential as the last thing we wanted the world to know was the “missing cash” in the company accounts. H told me that quite a number of the S-chip CEOs were on the same boat and some of the “funds” that used to backed their IPOs have been able to extend some credit directly to them ease the pressure from the foreign banks, secured by again, stock holdings of the CEOs. Little did he know that my assets had almost been entirely secured by all kinds of creditors already!
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Then the irreparable damage struck. I had borrowed some money from the local Chinese banks to punt in the local stock markets. The arrangement was such that I had to return such cash to the Chinese banks at the end of the year because they too, were subjected to annual audit. I had carefully maintained sufficient cash in our company accounts, which served as the “collateral to the conscience” of my friends in the Chinese banks. As I began to use them to fund the “margin calls” of the foreign banks and the amounts got further depleted by operation losses of the company amidst the worst economic crisis the world was now facing, my “friends” in the local Chinese banks were not going to take a chance on their own fate. They were definitely not “friends in need”. They simply deduct the amount I owed personally from our company accounts two days before their auditors came in, w! hich was of course, a few days before our company auditors came in. The rest was history...................
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The auditor, which was an international firm, was not going to take a chance with their reputation. They formally informed our board of directors in early 2009. In other words, they were warning the board that the financial statements they were going to publish would be “disastrous” and could cause a serious enquiry by the regulators. I think some insiders proceeded to sell some of their shares before any official announcements were made but most of us were warned not to do anything with our holdings as that would be considered “insider trading”. Of course, all my older colleagues and company directors hated me as a consequence. I was asked to absent myself from all their meetings as they attempted to come up with a solution before the mandated result announcement date stipulated by the Stock Exchange. I was very scared. I had no one to turn to as even Mr D had stopped answering my phone calls. Everyone was trying to distance himself from me and it became obvious that I was going to be the “scapegoat”.
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To protect myself, I seek the advice of some lawyers in China who in turn, consulted their friends in Singapore. To my relief, I was advised that should I be found guilty in the Singapore courts for misappropriating company assets, there was no established bilateral treaty as yet for Singapore court to extradite me from China. The China Securities Regulatory Commission, the securities regulator in China, had never once recognised their responsibility to regulate the S-chip companies listed in Singapore. In fact, the Hong Kong Stock Exchange had faced similar issues for decades in their attempt to regulate the P-chips, which were Chinese private enterprises listed on Hong Kong Stock Exchange, to no avail. In other words, as long as I refrained from stepping my feet on Singapore soil, nothing could be done to me. In any case, I thought given the hatred I faced from all my older colleagues and friends in the hometown, I should be taking some long overdue holidays. I relocate my family to a Chinese seaside town.
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Although I was now an ordinary citizen, I was glad that my wife kept quite a far bit of the money I gave her along the way and that should be enough to last us a life time, at least in China. Through internet, I came to know that the company finally disclosed the incident to the Stock Exchange and the stock was suspended. They appointed an investigator but I was no where to be found. So it would be interesting on how the story could turn out post the investigation report. In fact, a number of S-chips suffered from the same problems and were suspended from trading soon after us. Inevitably, there were cases of over-stated revenues, fathom receivables, missing cash, over-leveraged financial positions of the founding entrepreneur who mortgaged away their own stocks, as well as outright manipulation of stock prices. In many cases, I suspected the irregularities had begun right from the very beginning, before the companies were even listed. Many were not real companies at the first place. My friends in the know told me that a few more had been discovered as suffering from “missing cash” and jokingly commented that the Exchange had to arrange for a smooth sequence of announcements just like the way they schedule result announcements of listed companies. With all these irregularities exposed and more promised to appear, the stock prices of all S-chips have literally collapsed. All my friends and their “club members” must have suffered tremendous losses. Some dealmakers and their syndicate members apparently were facing margin calls on daily basis and some even declared themselves bankrupt. It must have been a very trying period for everyone. However, I did not seem to have much sympathy to all these people. I witnessed how some of them became filthily rich in a short span of time without having to work hard, while other enjoyed a good ride in fortune just because they (or their friends or relatives) were in position of influence.
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I was the only one that would be made a “scapegoat” and had to live a life of “exile”, while these guys could still just lick their wounds secretively and continued on with their life. I do not sym! pathize those institutional investors who lost their money as if they did, they were simply either incompetent or someone had benefited personally along the way in having committed their funds’ money in such investments. Curiously, I wonder who will speak on behalf of all the many ordinary people in Singapore who came to believe the investment potential of these S-chip companies after all the beautiful “packaging” the dealmakers and entrepreneurs wrapped around them, and went on to invest their life savings in the S-chips, only to find out one day that all these were worthless! So when dust finally settles one day, we shall all look back and evaluate what had gone wrong and who are to be blamed. I am sure all fingers will be pointing at the Chinese entrepreneurs such as myself, who are usually labelled as “greedy and unscrupulous”.
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There is a ring of truth to that accusation and I admit I am guilty. But how about those dealmakers, who taught us how to cook the books? How about those angels, who hid their identities behind some dealmakers and exerted influences to assist them to succeed in their schemes? How about those institutional investors who trifled with the money entrusted to them? How about those intermediaries and professionals who were not vigilant enough to protect the interest of the investing public? I would like to end with a comparison. The Ming Dynasty collapsed only after the General (Wu San Gui) they sent to defend the border against the Manchurians opened the gate voluntarily to allow the Manchurian’s army to come into the Great Wall. General Wu did that probably out of a promise to be made a king later on and be endowed tremendous amount of riches by the Manchurians. Of course, the historians would like to add that he also needed the help of the Manchurians to defeat another general that had taken his favourite concubine. In short, the thieves and robbers are only usually allowed in by the insiders..........
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If you have read the story till this part, I am sure you are either a victim or someone who is deeply interested in the development of the S-chips going forward. Please help to forward this email to any many such interested parties as possible. We need to put an end to all these irregularities lest more ordinary people on the street suffer unnecessary losses. In the process, you will help me to partially clear my name...... For I am not the only one to be blamed.................
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Note: 1. Not everything is true in this story that I have just presented in order to protect some friends that still remain friends. In particular, the story before 1995 was inserted in only to give you a perspective of the difficulties that most Chinese entrepreneurs went through, and how they eventually all came to resent the ease and ruthless manner in which people like Mr D made great fortunes leveraging off their hard work.
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2. At the same time, I sincerely hope that the investigation report that was pending in the case of my company comes out being at least “fair” to me. Otherwise, the more “real truths” will follow in subsequent emails......... hahahaha, the power of internet........
[Solstice (5-4 12:59, Long long ago)]
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哪个 textile fibre 公司 老总会写这么长的英文呢?[亢牛有悔 (5-4 14:09, Long long ago)] [ 传统版 | sForum ][登录后回复]2楼
SGX 的IPO简直是新加坡资本市场的大毒瘤，请看看上市的IPO几年后都掉成啥价了。[JSMEDP (5-4 14:09, Long long ago)] [ 传统版 | sForum ][登录后回复]3楼
Mr D? from the legendary D&H team?http://www.asiaone.com/Business/My+Money/Building+Your+Nest+Egg/Investments+And+Savings/Story/A1Story20080915-87760.html[CFA (5-4 14:50, Long long ago)] [ 传统版 | sForum ][登录后回复]4楼
(引用 CFA:Mr D? from the legendary D&H team?http://www.asiaone.com/Business/My+Money/Building+Your+Nest+Egg/Investments+And+Savings/Story/...)我觉得是的。文中也说MrD开发房地产。由几个deal maker开发地产的。[牛魔王 (5-4 14:53, Long long ago)] [ 传统版 | sForum ][登录后回复]5楼
(引用 亢牛有悔:哪个 textile fibre 公司 老总会写这么长的英文呢?)文中参参杂杂，但隐约可以看出是讲 fibrechem化纤新贵张飞跃
http://www.qzwb.com 2006年11月10日 00:00:00 来源：东南早报
□早报记者郭华萍
在这次的福布斯富豪榜上，出现了两位化纤行业的泉州富豪，其中一位就是张飞跃。据了解，福布斯是以其在新加坡的上市公司“纤化科技”为调查基础的，很少人知道张飞跃是泉州人，是在泉州发家，他成立的泓霖化纤公司就坐落在东海滨城工业区内。
记者几经周折拿到了张飞跃在泉州的手机号码，但拨打后提示的是关机状态，泓霖化纤的有关人员则告诉记者，张总基本上都在厦门，可以通过厦门的公司联系到他。
张飞跃在厦门成立的公司叫泓信，记者拨打了他办公室的电话，终于联系上他。电话那头，张飞跃用闽南话告诉记者，现在公司的总部在厦门，泉州这里的公司只是作为生产车间，自己不常在泉州办公。对于自己上了福布斯富豪榜一事，张飞跃表示，“那些数据不能代表什么，说明不了问题”。
创业准备
通过一系列资料的查找，记者仍然没有找到太多张飞跃成立泓霖化纤之前的材料，甚至都没有披露其年龄的资料。不过从电话里的声音听来，张飞跃应该还挺年轻。
相对于泉州不少民营企业家的“草根出身”，张飞跃算得上是高学历的。资料显示，张飞跃是大学毕业。在毕业之后的10年里，张飞跃并不是从事化纤行业，而是在保险、电子产品等和化纤毫无关系的行业里工作。10年的工作经历，为张飞跃的创业积累了“第一桶金”。
据不完全统计，现在泉州有超过1万家的服装厂，整个石狮遍布面料商铺。但是在1994年，整个泉州没有一家纺织面料原料化纤生产企业，原料全部来自江浙或者海外。张飞跃就是看准了这个市场空白，作出了一个重要决定：将自己的全部身家投入到服装行业的上游：化纤原料。
在创业前，张飞跃做了两件事情，一是在英属多米尼加投资移民拿到外国国籍，二是请人做了“差别化化学纤维”市场调研。“拿外国国籍是为了进出国境做生意方便，我的公司一注册就是外资，也可以享受税收优惠。”张飞跃说。
成立公司
1995年，张飞跃在泉州成立了泓霖化纤有限公司。在化纤原料中，泓霖化纤选择了差别化的化学纤维产品，“最开始我就决定做差别化产品，虽然市场相对较小，但是同类产品也少，利润率比常规化纤要高出20％以上。”张飞跃说。最初投资的化纤项目，光是生产线就需要超过2亿元的投资，在7个创始人股东中，张占了42％的股份。
公司的发展，证明张的判断没错。从1994年开始，泉州化纤行业开始以每年30％以上的速度递增，与此同时，以溶纺为主的常规化纤原料利润迅速降低。
此时，泓霖化纤的差别化产品的优势得以凸现，以区区3万吨的产能保持了快速增长。张飞跃很庆幸：“要是我也上溶纺的项目就惨了，因为我不可能像那些国有企业一样有大把银行资金支持扩大规模。”
与化纤原料市场同速增长的，还有同类产品的走私货品。上世纪90年代化纤原料的关税在20％左右，走私货品对本地产品的价格冲击每吨2000元左右，这差不多就是一半的利润。1999年对走私的严打，让泉州的化纤企业松了口气，与此同时，张飞跃开始考虑应对危机的方法。这个方法和他创业时的思路一样，还是差别化，比差别化更差别化，上产品更细分、市场更小、利润率更高的项目：海岛化学纤维和涤锦复合纤维。
两个项目对资金的需求约为1亿元。是用自有资金、银行贷款，还是上市募集资金？张飞跃毫不犹豫地选择了上市。
上市周折
在新加坡上市之前，张飞跃最早把上市申请递交给了香港证券交易所，却在即将进入聆讯之前退出了申请。张的解释是香港资本市场没有新加坡资本市场对传统工业企业的认可程度高，而泓霖化纤上市保荐人的评价也许更加直接：“张飞跃志不在于此（香港）。在香港上市，泓霖的市盈率只能到5倍左右；在新加坡，泓霖的首发市盈率在9倍左右。”
但是在新加坡上市并不顺利。2003年8月第一次递交申请后，新加坡证券交易所收到了针对泓霖化纤的匿名来信，泓霖化纤的上市申请被驳回了。张飞跃认为申请被驳回的主要原因在于没有将公司曾在香港申请上市的过程详细披露，于是，随后他就在新的初步售股书中加入长达七页的“额外的公司历史资料”。
在补充了充分的资料后，纤化科技终于在2004年的4月份登陆新加坡主板市场。
资金雪球
背靠新加坡资本市场，张飞跃有信心上更多的项目。除了海岛化学纤维和涤锦复合纤维外，还有下游的仿真皮。现在全球运动鞋的30％在泉州生产，仿真皮的需求让张飞跃非常看好这个项目的前景。
张飞跃很怕别人把仿真皮当成以前的人造革：“以前的人造革为什么不行，就是因为纤维太粗，容易断裂。现在仿真皮的原料———海岛短纤只有传统纤维1／30细，不只解决了易断裂的问题，防水透气性能都和真皮接近。”利用募集到的资金，泓霖化纤在短纤生产上将占有超过10％的国内市场份额，短纤和仿真皮的年产值会超过5亿元。
张飞跃当然不会忽视新加坡投资机构对泓霖化纤的热情。“上市前后已经有超过30家投资机构到泓霖考察。投资者来了解你，会帮助你想再次融资的办法。有的机构直接问我：你资金够不够，不够我再给你。”
在新加坡上市半年以后就可以配股，没有次数限制，只要有机构愿意认购。正是看到资本市场的这个好处才一定要上市的张飞跃，在上市半年后开始和英国伦敦的NewSmith协议定向增发股票，并获得了2500万新元的资金，甚至超过了IPO募集资金的数额。
“2500万新元，这只是个开始。”在泓霖化纤股东大会通过定向增发议题后，张飞跃对所有股东说，上市不是为了拿一笔钱，而是为了给公司提供源源不断的资金支持。
迁址厦门
在电话中，张飞跃向记者表示，现在公司的总部在厦门，泉州的公司负责生产。在厦门，公司有300亩土地。
像很多白手起家的创业者一样，张飞跃对于公司运作的每个细节都很关心。不过，在公司治理上，张并不希望凡事都要自己亲力亲为。“公司不同的发展时期要匹配不同的管理队伍，厦门的两个工厂一开，泓霖的规模就扩大了两倍。管理怎么能跟上是我面临的最大的问题。”
现在，张飞跃想先充实中层管理队伍，逐步完善管理架构，“有可能过几年会引进国外的管理模式和高层管理人员。上市除了带来资金还会带来监管，如果我头脑太热，有人给我泼泼冷水也好”。
[Solstice (5-4 15:14, Long long ago)]
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(引用 Solstice:文中参参杂杂，但隐约可以看出是讲 fibrechem化纤新贵张飞跃 http://www.qzwb.com 2006年11月10日 00:00:00 来源：东南早报 ...)我能想到的曾经“试图隐瞒”香港上市未果历史的龙筹，就只有Fibrechem和Biotreat[CFA (5-4 15:23, Long long ago)] [ 传统版 | sForum ][登录后回复]7楼
看完了本来证券市场方面就很黑暗，美国不也会是这样，中国的上市公司 更如此
看看最近出现的很多答案
只能说 expected 的
不过 英语能能这样子，还是很强的。。[vitesse (5-4 16:18, Long long ago)]
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