No hair loss for Jimmy Lai over shampoo judgment

Next Digital Group, owned by Jimmy Lai, has been fined HK$3 million for a report about a herbal shampoo (inset) produced by Bawang International. Photos: HKEJ, Reuters

Phew. You could almost hear media maverick Jimmy Lai expressing relief, instead of tearing his hair out.

The chairman of Next Digital Group (00282.HK) is still out for HK$3 million (US$386,214) but not the HK$630 million a plaintiff had sought in a defamation case against Next Magazine.

A High Court judge handed down a HK$3 million penalty judgment for herbal shampoo maker Bawang International (01338.HK) over a Next Magazine report that its product caused cancer.

The judgment, which defied expectations, took Next Digital and Bawang on a roller coaster ride.

Lai’s flagship went up as much as 7.7 percent after the judgment and closed at 46 HK cents, taking its market capitalization above HK$1.09 billion.

Bawang lost a 20 percent gain.

It was a classic case of financial journalism in which an investigative report can make or break a company.

Bawang was an investor darling and a direct play on Chinese consumers because it commanded a market share that dwarfed Rejoice at one time before the Next Magazine report.

Bawang lost its halo faster than Cinderella’s carriage turned back into a pumpkin after midnight.

The stock fell more than 90 percent from about HK$6, losing HK$1.54 billion of its value over the next five years.

Bawang sued Next Magazine six years ago. The trial went on for 39 days until August last year.

Apparently, High Court Judge David Lok was not satisfied that Next Magazine produced enough evidence in its own defense.

But before announcing the verdict, Lok cautioned that he would have to take press freedom into account in assessing the award.

He said the size of the compensation might deter the media from doing investigative stories.

As it turned out, what he had in mind was a small fraction of the consensus estimate of legal experts.

The amount is probably not enough to cover Bawang’s costs.

It was also a less than the political penalty one might expect for a media group notorious for being a pain on the side of the government.

Before the judgment, there was talk Next Magazine might close its Taiwan business because of deteriorating business environment and the shift to digital publishing.

That came with rumors that the 26-year-old magazine could be forced to fold if it lost the case, not that it does not have financial challenges already.

Jimmy Lai can thank his lucky stars.

Now that Next Magazine has survived, he needs to find a way to convince readers to continue to pay HK$20 per copy with much weaker content after a round of newsroom firings.

That’s nothing compared with Bawang’s problem. It still needs to rebuild the brand even after the company was vindicated by no less than the High Court.

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