×
You will be redirected back to your article in seconds

Hong Kong, China Trio Seek Stock Market Explosion With ShiFang Investment

Three old-guard filmmakers from Hong Kong and China have given themselves a new stock market-listed vehicle with which they plan to ride the bubble in Chinese entertainment investment.

China’s Shi Jianxiang has teamed with Hong Kong’s Ng See Yuen and Tsui Siuming (aka Hsu Hsiao-ming) to take control of money-losing shell company ShiFang Holding.

The Hong Kong-listed company is planning to reverse itself into Shanghai Hehe Film, a company which owns 55% of the net theatrical revenues in mainland Chinese from martial arts sequel “Ip Man 3.” The film starring Donnie Yen and Mike Tyson was released in Hong Kong shortly before Christmas and scored a stellar HK$60.5 million (US$7.84 million).

The old ShiFang was a bombed-out newspaper and magazine publisher that had struggled to shift to an online business model. In the first half of 2015 the company lost HK$55 million (US$7.10 million) on revenues of HK$41.7 million (US$5.38 million).

Despite a Jan. 8 profits warning and ahead of the release of “Ip Man 3” in China – the film hits mainland screens this week (March 4, 2016) — the trio have been quick to give themselves handsome pay packets and substantial paper profits.

Tsui, a director, producer and former TV executive, joined ShiFang in December 2015 and became CEO on Jan. 26 with a HK$3 million (US$387,000) salary. Shi, producer of the upcoming Bruce Willis-starring “The Bombing,” and chairman of the Shanghai Kualiu Investment Group, has become chairman and executive director of the company. His three-year contract gives him HK$4.8 million (US$620,000) annually. Ng, a veteran producer and exhibitor, whose other business interests have straddled Hong Kong and Cantonese-speaking parts of Southern China, is designated as a non-executive director with a stipend of HK$360,000 (US$46,400).

The company has announced two share subscriptions, one of which sees Shi pay HK$128 million (US$16.5 million) for 160 million shares (15.9%) of the company at HK$0.8 per share. That is a very substantial discount to the HK$3.71 at which the shares stood at the close of business on Tuesday.

In a press statement the company Tuesday boasted: “The performance in the stock market demonstrates the faith of investors in the new business model and their upbeat prognosis for the company’s future.” The company has a market capitalization of HK$3.83 billion (US$494 million), and Shi’s entire stake (187 million shares) is now worth HK$693 million (US$89.4 million).

ShiFang says it has a new film business model that will see it involved in investment and distribution – yet already it is planning a diversification that is at first glance tangential to its stated business plan.

“The company plans to combine filmmaking with online and appropriate financial backing in a move to open up more opportunities in mainland China, now the second largest market worldwide in terms box office revenues. … the company will invest in excellent screenplays as they are regarded as the most productive force in the film market. Lastly, the company intends to add financial support to the traditional distribution of films and leverage online big data as a strategy to enhance the precision in terms of the targeting of film distribution with the expectation of doubling the box office receipts of the films it produces.”

On Feb. 23 it announced plans to buy a 15% stake in a privately owned securities company with 20 branch offices in Southern China offering “customized and integrated financial consulting services.” ShiFang says the company, which has no English name, now has a valuation of HK$2 billion (US$258 million), implying a HK$300 million (US$38.7 million) cost to ShiFang.

ShiFang says the businesses are complimentary. “The target company proposes the idea of ‘Internet + film and television + finance,’ which turns some of its financial products into a form of consumer product for film distribution by incorporating the function of film ticket redemption with investment,” ShiFang said in a regulatory filing.

Shell companies have been a popular route for mainland and Chinese entertainment companies to list on the stock market at a time when the mainland IPO market has been crimped by regulatory rulings and massive equity market turbulence.

Others that have chosen this route include Alibaba Pictures Group, which was created from ChinaVision, and Jiuhao, a shell that recently enjoyed investments from Tencent, Alibaba and Huayi Brothers.

The incentive to list is huge given the stratospheric valuations still applied to entertainment stocks in China, even after last year’s China share market crash. Earlier this week exhibition chain Wanda Cinema Line unveiled profits of RMB1.18 billion ($180 million), and is valued at RMB94.3 (US$14.5 billion) — a historical price to earnings ratio of 80 times.

And with 2015 theatrical grosses up by 48% at the mainland Chinese box office and growth still happening this year, the flow of investors – large and small – is unlikely to dry up soon.

The risk factors are clear. “3D epic war blockbuster movie ‘The Bombing’ calls for RMB700 million (US$107 million) in funding, RMB500 million (US$76.3 million) of which is already in place, representing the biggest investment to date in a Chinese-language 3D film. Given the huge investment and the impossibility in predicting the resulting income, all eyes will be on Shi’s efforts to apply the financial management model behind ‘Ip Man 3’ into ‘The Bombing,’ ” ShiFang said in a statement.

“The Bombing,” which stars Bruce Willis, Adrien Brody, Liu Ye, Fan Bingbing, Song Seung Heon, William Chan, Nicholas Tse, Chen Daoming and Liu Xiaoqing, is currently in post-production ahead of a late 2016 release. South Korea-based Macrograph is delivering the special effects, Technicolor USA is handling sound effects and dubbing, and U.S.-based post-production firm Company 3 is handling post lighting design.

 

More Biz

  • Peloton Sued for $150 Million for

    Peloton Sued for $150 Million for Using Drake, Lady Gaga Music Without License

    A group of publishers including Downtown Music Publishing, Pulse Music Publishing, ole, peermusic, Ultra Music, Big Deal Music, Reservoir, Round Hill, TRO Essex Music Group and The Royalty Network filed a lawsuit against Peloton for infringement of more than a thousand musical works, according to a statement from the National Music Publishers Association. The plaintiffs are [...]

  • Bruce Ramer Re-Appointed to Corporation for

    Bruce Ramer Re-Appointed to Corporation for Public Broadcasting Board

    Top showbiz attorney Bruce Ramer has been reappointed to the board of the Corporation for Public Broadcasting, the nonprofit org that administers federal funding for public broadcasting. Ramer, a partner at Gang, Tyre, Ramer, Brown & Passman, was elected chair of the CPB board in October. He previously served as board chair from 2010-2012. His [...]

  • Gary Knell

    Listen: National Geographic Chief Gary Knell on Disney Future, Fox's Legacy

    The marriage of National Geographic Partners and Disney, which becomes official today, is the proverbial brand match made in heaven. Disney is taking over the stewardship of Nat Geo Partners — a joint venture with the National Geographic Society — as part of its acquisition of 21st Century Fox. The transition comes at a time [...]

  • Celebrity Admissions Scandal

    Admissions Scandal Reveals the Deep-Seated Ties Between Celebrities and Top Colleges

    Hollywood is fixated on the federal investigation into a massive college admissions scam. It’s a scheme that has all the ingredients of a ripping yarn, a portrait of the corrosive influence of celebrity and wealth in higher education. It’s also a story that has deep links to the entertainment industry. Felicity Huffman and Lori Loughlin, [...]

  • Songtrust’s Joe Conyers III Slams Streaming

    Songtrust’s New Chief Strategy Officer, Joe Conyers III, Slams Streaming Services’ CRB Appeal

    Songtrust, the digital rights-management platform cofounded by Downtown Music Publishing’s Justin Kalifowitz, today announced that Joe Conyers III has been elevated to Chief Strategy Officer. According to the announcement, as co-founder and GM of Songtrust for the past eight years, Conyers has led the company from prototype to servicing over 20,000 publishers to collect their [...]

  • Paul Ryan

    Fox Corporation Emerges as Standalone Entity, Paul Ryan Joins Board

    UPDATED: 21st Century Fox said Tuesday it has completed the distribution of shares to birth the Fox Corporation. “21CF and FOX are now each a standalone, publicly traded company,” 21st Century Fox said in a statement issued at 8:30 a.m. ET. The separation of new and old Fox begins a new era for the Murdoch [...]

More From Our Brands

Access exclusive content