Sanergy’s 98% meltdown wipes out US$2.6 billion of Chinese graphite firm’s value

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Hong Kong regulator’s warning of concentrated ownership triggers sell-off in stock that had jumped 400 per cent in last three months

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Zhang Shidongin Shanghai

Published: 3:08pm, 3 Sep 2024Updated: 4:43pm, 3 Sep 2024

Sanergy Group, a maker of graphite products, tumbled 98 per cent after Hong Kong’s securities regulator warned investors against trading the stock because of its highly concentrated ownership.

The stock slumped to HK$0.325 before trading was suspended at 2.50pm on Tuesday, erasing HK$20.1 billion (US$2.58 billion) of the company’s market value. About 1.5 billion shares changed hands for the day, compared with the stock’s 30-day average of 1.4 million, according to Bloomberg data. The Hang Seng Index fell 0.2 per cent.

The meltdown came after a statement issued by the Securities and Futures Commission (SFC) said that 90.2 per cent of Sanergy’s shares were in the hands of a small group of investors, a structure that would potentially spell risk for investors.

“Shareholders and prospective investors should be aware that the price of the shares could fluctuate substantially even with a small number of shares traded, and should exercise extreme caution when dealing in the shares,” the SFC said in the statement.

The drastic plunge continues a roller-coaster ride for the stock, which had jumped more than 400 per cent within three months through mid-August. The wild swing underscores the risks posed by a swathe of small-capitalisation stocks trading in the city, which are now facing increased scrutiny from regulators as they seek to eradicate malfeasance and protect investor confidence.

As of August 19, Sanergy executive director Hou Haolong held a 57.67 per cent stake, or 582.5 million shares, through a slew of investment units, and a group of 25 shareholders had a 27.65 per cent interest, or about 280 million shares, according to SFC’s statement. Other shareholders held a 9.8 per cent stake, while the remaining 4.88 per cent was not held in the central clearing and settlement system and not registered on the company’s Hong Kong register of members, it said.