49 Details for Business Success - Mastering the Key Skills for Entrepreneurship

Author: Han Qijun
Publisher:
Publish Date: 2006-09-01
Features: Who doesn’t want prices lower when buying things? But if the entire market is sluggish, ginseng being sold at the price of radishes, would you still dare to buy it at that time? Business is like everything else—people like to follow the crowd, but only by learning to think independently can one stay clear-headed: ginseng is still ginseng even when it’s cheap, and if you dare to act now, you’ll surely make a big profit. The first Chinese billionaire, Li Ka-shing, excels at handling investment details like knowing when to advance and when to retreat. Li Ka-shing once said, “Don’t overestimate things in good times, and don’t underestimate them in bad times.” In fact, when others see things as very bad, he looks at them from another angle and isn’t misled by temporary changes in the world. In the 1970s, Hong Kong experienced a major stock market crash, pulling the real estate industry down with it. Li Ka-shing, who deeply understood the rise and fall of Hong Kong’s economy, believed that after the downturn, there would definitely be a new upswing. Therefore, the downturn in the stock and real estate markets was the perfect time to expand his business. Expansion requires capital. So, Li Ka-shing decided to issue new shares to raise funds. In 1974, Cheung Kong issued 17 million new shares to purchase a 50% stake in “Urban Properties Investment Company.” In reality, this was a trade for its two commercial buildings, the LKS Tower and the World Tower. The two commercial buildings generated annual rental income of HK$8 million to HK$9 million. Due to the real estate downturn, Urban Properties faced a financial crisis. Li Ka-shing seized this favorable opportunity, acting against the trend, and achieved low-cost expansion. In May 1974, Cheung Kong partnered with the reputable Canadian Imperial Bank of Commerce to establish Eton Finance Company. Li Ka-shing served as the company’s chairman and CEO, opening the door for Cheung Kong to attract foreign investment and expand its overseas business. Between 1974 and 1975, Li Ka-shing issued two rounds of new shares to raise about HK$180 million. Additionally, in his personal holdings of Cheung Kong shares, he sold 20 million shares to Polybroad Limited for HK$68 million in cash. This allowed Li Ka-shing to accumulate ample cash, enabling him to buy large amounts of land at low prices during the real estate downturn. Li Ka-shing’s foresight proved correct. By 1976, the Hong Kong real estate market turned around. People were surprised to discover that while the entire real estate industry was dormant, Li Ka-shing never rested for a moment. His small real estate company had grown into a real estate empire. When Cheung Kong went public in 1972, it owned 350,000 square feet of property. After acquiring vast amounts of land and building during the downturn, by the recovering year of 1976, Cheung Kong’s property and land holdings had rapidly expanded to 6.35 million square feet. Pushing further, Cheung Kong then issued 55 million new shares to raise HK$110 million, continuing its massive expansion of property and land holdings. In 1977, Cheung Kong’s property and land holdings jumped to 10.2 million square feet. What was once seen as a pipe dream or fantasy—the goal of catching up with the then-largest real estate company in Hong Kong, (Urban Properties)—had become within reach, almost within grasp. Li Ka-shing’s vision and ambition in the real estate industry, along with his remarkable achievements, began to reveal his extraordinary demeanor. Let’s analyze the cleverness of Li Ka-shing in this story—he knows the market well