China’s Sanergy puts blame for Hong Kong stock meltdown on major investor’s forced stake sale

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Sanergy’s stock plummets 98% after a forced share sale by its largest shareholder, Otautahi Capital

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Outside the Stock Exchange of Hong Kong in Central. Photo: SCMP/Jonathan Wong

Zhang Shidongin Shanghai

Published: 1:00pm, 4 Sep 2024Updated: 4:34pm, 4 Sep 2024

Sanergy Group’s 98 per cent stock-price crash was triggered when its largest shareholder was forced to sell part of its stake, the maker of graphite products said Wednesday.

Sanergy cratered on Tuesday when about 370 million shares, amounting to a 36.6 per cent stake in the company, were forcibly sold onto the Hong Kong market by brokerages using margin securities accounts, Sanergy said in a statement to the city’s bourse on Wednesday. Sanergy said it was informed about the forced sale by major shareholder Otautahi Capital, which now owns 21 per cent of the graphite products company, down from about 57.7 per cent before the forced liquidation. Otautahi Capital is controlled by Sanergy executive director Hou Haolong.

“The group’s business operation remains normal, and there is no material change to the business operation and financial position of the group,” Sanergy said in its statement.

Sanergy’s precipitous decline on Tuesday caught investors off guard; many scrambled to determine what was behind the meltdown. Tuesday’s action wiped away HK$20.1 billion (US$2.58 billion) in Sanergy’s market value, as its daily turnover surged 1,000-fold from the 30-day average.

Otautahi Capital was previously Sanergy’s largest shareholder, and a group of 25 stakeholders owned an additional 27.65 per cent interest, according to an earlier statement from Hong Kong’s Securities and Futures Commission (SFC). The SFC had conducted an inquiry into the company’s shareholder structure.

The SFC determined that Sanergy’s ownership was highly concentrated and warned investors about the risks of trading the stock. Sanergy shares surged more than 400 per cent in the three months through mid-August. The company’s stock-price collapse has exposed the risks of a number of small-capitalisation stocks trading in the city, as regulators move to increase scrutiny in an effort to bolster investor confidence.