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November 30, 2000

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FEBRUARY 25, 2000 VOL. 26 NO. 7

Raise the Red Flag
David Webb has a strange hobby. He unearths evidence of shady financial deals and shares what he finds on the Net

Ira Chaplain for Asiaweek

Every country gets the Internet pundit it deserves. In the U.S., where people love a good scandal, cyberscribe Matt Drudge dishes celebrity and political dirt with The Drudge Report. In money-mad Hong Kong, it is David Webb, an investment banker turned independent stock trader, who carries the banner of the online exposé.

Webb's homepage,, is more soapbox than journalism. Yet it provides, with an investigative flair, a rare illuminative glimpse into the darker corners of Hong Kong corporate culture. Webb's exhaustive sleuthing through the disclosure statements and financial reports of listed companies has yielded what is best described as an online collection of cautionary financial case studies. In painstaking detail, he unravels paper trails and connects the dots to reveal how business barons engineer windfall profits, often by shuffling assets at inflated share prices among related holding companies.

"It's not advice for punters," says Webb, 34. "It's my pro bono work for the investment community." The deals he likes to red-flag on his home-published site are those that smack of cronyism - he was a vocal critic of the sweetheart Cyber-port deal between the government and tycoon Richard Li - or backroom pacts that trample upon the interests of ordinary investors. Last summer Webb-site led a shareholders' revolt that blocked Wheelock's plan to privatize the Lane Crawford department store chain. Webb argued that the payout offered to shareholders was too low. More than 10% of minority owners backed him, and management was forced to up the price by 7% to complete the deal.

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Webb earns an income as a private investor himself. The Oxford math graduate made enough money in 12 years of investment banking to settle into semi-retirement at 32. "I was restless," he says. "Once you've done one Indonesian rights issue, you don't need to do another." Now on his own, he has made a specialty of trading in Hong Kong's small- and mid-capitalization stocks - researching some 600 companies which make up just 10% of the market's total value. He is looking for bargains, but frequently uncovers irregularities and questionable transactions that become fodder for Webb-site. "I run across some horror stories," he says. "For every one I publish, there are another five I haven't. I get a lot of amusement out of it."

Some are not amused. Amid the Cyber-port controversy last year, Webb became front-page news in Hong Kong when he was targeted for investigation by Kroll Associates, a corporate detective agency. A Kroll employee, posing as a journalist, sent an e-mail message to Webb inviting him to a meeting. Suspicious and aware that he had been attacking a pet government project, Webb checked the e-mail header information and found it originated at Kroll's Hong Kong office. Webb never learned who hired the company to look into his background, but the incident gave him pause. "You wonder whether somebody is tracking your credit cards or watching your home," he says. "You don't know how far it goes."

He says he is not worried about libel lawsuits, but that may be because he is confident in his reporting. Investment banking gave him an ability to read between the lines of financial reports. With his insider's eye comes an outsider's frustration with the region's lax securities regulations, outmoded accounting standards, lack of corporate transparency and general disregard for shareholders' rights.

"I've always had an interest in improving corporate governance," he says. The Web is an ideal forum, and e-publishing is no technical challenge. As a teenager in Britain, Webb wrote video games and electronics books. At 18, he financed his first stock purchase on the royalties.

He does not expect his Internet venture to become more than a hobby. The site averages about 300 visitors a day and a related e-mail service has about 1,100 subscribers - hardly enough to justify an IPO. "I've taken the Internet financial model to the next level," he says. "Not only does [Webb-site] have no profits, it has no revenues, either." Just as well. With no shareholders to placate, Webb can go on poking about in the nooks of the stock exchange - helping to shed some light on some of the SAR's shadier deals.

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