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New | Roller coaster ride exposes Hong Kong GEM’s weaknesses

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The share price of Dadi Education Holdings fell then they traded for the first time in Hong Kong last month, seemingly breaking the long tradition of first-day bumper gains. The stock began a three-day surge last week in which it soared fivefold, and fell 31 per cent in two days. Photo: SCMP

With four issuers on the Growth Enterprises Market board shot down by regulators, should one expect Hong Kong’s farmers of corporate shells and price fixers to be in mourning?

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Not at all. It’s business as usual. They say wherever there’s a rule, there’s a way. The name of the new way is Patience.

The story of version 2.0 is best told through the IPOs of two GEM-listed stocks within a week of each other last month.

Dadi Education, a consultancy that advises students on overseas studies, sailed through the tightened regulatory hurdles, with its shares soaring 400 per cent since March 1. GME Group Holdings, an old fashioned civil works subcontractor, had its shares suspended after a mere four hours on the stock market on February 22, during which prices soared fivefold.

The duo are typical of the second board, exhibiting various red flags of a listed shell as defined by the Hong Kong Stock Exchange - small fund raising, minimal market capitalisation and deteriorating profit.

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Both launched their share sales within days of a January statement by the Securities & Futures Commission and the Hong Kong Stock Exchange threatening to block stock listings in the case of bogus share allocations.

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