• Ben Tatters

Activist Investing at Next Digital


Credit: Jimmy Chan


In the most high-profile arrest of the Hong Kong national-security law so far, Jimmy Lai, chairman of Next Digital, was apprehended on Monday 10th August. Lai, alongside 7 other Next Digital executives, including Cheung Kim Hung (CEO of Next Digital Limited), Chow Tat Kuen, Royston (Executive Director and CFO of Next Digital Limited), was detained on suspicion of colluding with foreign forces, a crime punishable by up to life in prison.


Perhaps the most publicised episode of this saga, however, was the stock market reaction, in what has been described as a new form of democratic activism. After initially falling by almost a fifth, shares in Next Digital, jumped as much as 344% to their highest since June 2019 at HK$0.40, boosting its market value by HK$817 million ($105.42 million). This meteoric rise continued into Tuesday, reaching a cumulative 1000% growth over the 2-day period, fuelled by trading volumes at ~14 times the equity’s recent average. Although the trading activity inevitably slowed on Wednesday after the Securities and Futures Commission threatened to intervene, the overall 3-day growth remained enormous and represents a unique example of the influence of investor sentiment.

To fully understand the significance of Lai’s arrest, and its cause, it is necessary to look at the recent history of Next Digital. Next Media publications - the parent company of Next Digital - are known for highly sensationalised articles on HK-China relations. The publication has often taken a clear and sometimes proactive support for pro-democracy groups in Hong Kong, to such an extent that some companies with ties to China never advertise in any papers or magazines owned by Next Media. It is regarded as a pioneer of paparazzi and yellow journalism in Hong Kong - yellow, in this case, is associated with the opposition in Chinese-ruled Hong Kong. The bold style of journalism seems to trigger constant trouble with incidents of criminal damages at the offices of Next Media. As such, it comes as no surprise that Chinese forces chose to target Lai in the first high-profile case, and an arrest which is sure to worry other Hong Kong publications with democratic inclinations.

Next Digital shares soar amid investor activism, Source: Yahoo Finance


The incident has given rise to a new breed of activist investor: a group that may come to shape both the geopolitical and financial future in Hong Kong. On Wednesday, around 30% of Next Digital’s trading came from investors transacting only one or two lots of 10,000 shares — suggesting the rally has mostly been driven by retail investors. One such retail investor said that purchasing shares was the only way to show support and they didn’t care if they lost all their money. As well as this, local pro-democracy forums were reported posting the following message - “Emergency call for yellow stock circle, 282 needs people” - referring to Next Digital’s stock identification. Could this be a rare and potentially novel case in the markets where political considerations completely supersede monetary ones in trading decisions? Whether or not that is the case, the event still serves to highlight the power of democratic retail investors in HK.

Alongside the low-profile activity of retail investors, larger celebrities and renowned, democratic activists also participated in the action. A former columnist for the media group, Stanley Wong, said he bought 1.2 million shares before Monday noon to show support for the company and then offloaded them, making a profit of HK$75,000. Wong said he would use the proceeds to fund a scholarship at the Chinese University of Hong Kong. Denise Ho, a Cantopop singer and democracy campaigner, also showed public support for Next Digital, describing the company as “the bravest penny stock ever”. The unwavering support of retail investors is not mirrored by institutional investors, however, who worry of the repercussions from Chinese policing and of the company’s management uncertainties. “Buying Next Digital at this moment is too politically sensitive,” said Steven Leung, an executive director at UOB Kay Hian, the Singapore-based investment bank. “The company is losing huge amounts of money every year. Financially and politically, there is no point.”

Given Next Digital’s extreme price movement and management breakdown, a significant focus has been placed on the company’s near-future plans. Brokers in the city noted market speculation that a takeover of Next Digital was imminent. However, traders could not agree on whether the company could face a hostile takeover from a mainland Chinese group or a pro-democracy white knight. Nonetheless, the global-level publicity, and solidarity with the security struggles in HK, will undoubtedly boost the company’s profile. Taking an industry-wide perspective, the Lai arrest may have a polarising effect; some publications, out of fear of Chinese punishment, may avoid any content with democratic references, while others, in defiant support of Next Digital, may continue or even expand such content. This development will provide interesting viewing and could prove to be a geopolitical barometer of HK-China tension.


Source: Zee News


It is impossible to discuss any Hong Kong security issues without contextualizing them against the backdrop of US-China tension, particularly since the administration of US president Donald Trump last week imposed sanctions on Carrie Lam, the territory’s leader, and 10 other individuals in retaliation for the security law. Trump described Lai’s arrest “terrible” and praised the activism of Hong Kongers, an unsurprising response from a president eager to continue undermining China’s influence. It is difficult to see what direct role the US will play in the Lai saga, however, there is no doubt that Trump will continue to support those threatened by Chinese policing in the territory.


There are many insightful lessons to be learnt from last week’s events, whether that be the rise of activist investing, the hesitation of institutional investors or the future content of the Hong Kong media. Moreover, with this being only the first high-profile arrest, the events at Next Digital may provide an invaluable blueprint for the future media landscape in Hong Kong.

Edited by Sagar Agrawal