HONG KONG -- What a pity. For once, an Internet stock actually shows not only promise but profits, too. Then, out of nowhere, one-half of the board of directors sues the other half, and the stock drops 30% in a day.

This is the unfortunate fate of Hong Kong-listed

e-New Media

, profiled by

TSC

on

Feb. 24. Analysts liked it, as did the

Matthews Asian Technology

fund and the $120 million

(MAPTX) - Get Report

Matthews Pacific Tiger Fund.

The issue raised a lot of money, which the company was going to use to make acquisitions that augment its core Internet product. That product allows buyers without credit cards to bill Internet purchases to their telephone accounts, a useful idea in a region where credit cards are not as prevalent as in the U.S. There was talk of a

Nasdaq

listing, though never a formal application.

Then, after a mid-April board meeting, e-New Media was suspended from trading at the company's request. It remained off the market from April 21 until Thursday. When trading resumed after an announcement of the board spat, the stock plunged by 36% to close at HK$0.80.

The fight between factions on the board is about nothing less than control of the company. e-New Media was formed through a so-called "backdoor listing." Investors bought into a sleepy company,

Essential Enterprises

, already listed in Hong Kong. When the directors of the old company tried to fire the managing director (who had been at the old company along with them), the group of new directors balked.

Now, according to a company announcement at the stock exchange, "certain directors issued writs" on May 16 that named "other directors and others as defendants."

e-New Media CEO Andrew Wilson declined to comment on the case. Details remain sketchy.

Could there possibly be a case for hanging on to this company? Or buying in now? That all depends on how confident you are that what looks like an all-consuming boardroom brawl won't interfere in day-to-day operations.

Of the three analysts in Hong Kong who watch e-New Media, the only one maintaining his buy recommendation is Adrian Ngan, who works for the company that both underwrote the IPO and did last January's placement:

BNP Prime Peregrine

.

Pointing out that e-New Media has HK$0.60 a share in cash, Ngan said that its price of around HK$0.80 means the stock is a value buy, especially because it now trades at a 45% discount to book value. Still, he cautioned, "if you are not willing to take on more risk then you had better avoid the share."

Not good enough for Greg Feldberg, a former enthusiast at

Indosuez W.I. Carr

, which has no underwriting relationship with the company. He said he would never recommend a company if he didn't know what exactly the board was fighting over. Feldberg said he was as stunned as anyone by the politics at e-New Media. "The business plan looked all right before. There was no inkling of a fight brewing," he says.

The fight is so consuming that the stock was suspended for four weeks because the two groups of battling directors "were unable to agree on the form of a joint announcement elaborating the cause and nature of the dispute which led to the suspension," according to the announcement.

Beyond the fate of this one stock, there is an equally important question: Why should it be so easy for companies to get their shares suspended from trading? Should it have taken a month to announce that the directors couldn't agree on making a statement?

One source at the company said the directors had been under intense pressure from the stock exchange to relist their shares and were given Thursday as a deadline. After all, one thing investors consider when buying a stock is liquidity risk: If Hong Kong lets companies keep their shares off the market for no clearly stated reason, other companies listed on the market could look relatively riskier to own.

A spokeswoman for the stock exchange, Lorraine Chan, said the listing rules do not stipulate any limit on trading suspensions. "The circumstances for each suspension are different," she said. "We can't comment on individual companies' cases."