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Apple Daily publisher Next Digital’s roller-coaster ride underscores regulatory challenges in the age of social media

  • Shares of Apple Daily parent plunged 41 per cent on Wednesday, after shooting up by as much as 58 per cent in early trading
  • Those without regulatory qualifications calling on the public to buy a certain stock could be sued for losses, law firm says

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Trading in Next Digital shares slowed as calls on social-media platforms in support of founder Jimmy Lai Chee-ying waned on Wednesday. Photo: Bloomberg
Yujing LiuandEnoch Yiu

A two-day rally in Next Digital’s shares has receded as quickly as it rose, much like the metaphor “be water” that guided Hong Kong’s anti-government protests, leaving the city’s financial regulators to deal with volatility driven by highly motivated participants in the age of social media.

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Shares of Next Digital, the parent company of Hong Kong newspaper Apple Daily, plunged 41 per cent to HK$0.65 on Wednesday, after shooting up by as much as 58 per cent in early trading. The pullback came after it skyrocketed 12 times over Monday and Tuesday.

Investors rushed to exit the stock after the Securities and Futures Commission (SFC) issued a warning about the risks of trading the stock, while momentum slowed as calls on social-media platforms such as LIHKG about buying the stock as a way of supporting founder Jimmy Lai Chee-ying, who was arrested under the new national security law, waned.

“Investors should be aware that by buying shares in the market, they are not supporting the company, they are supporting those who are selling,” according to a blog on the website of Hong Kong’s gadfly activist investor David Webb, that reproduced the SFC’s August 11 statement. Webb, who owned 4.9 per cent of Next Digital shares as of June 2018 according to exchange filings, could not be reached to comment if he was still a shareholder.
Jimmy Lai, Next Digital’s chairman, was released on bail early on Wednesday. Photo: Bloomberg
Jimmy Lai, Next Digital’s chairman, was released on bail early on Wednesday. Photo: Bloomberg
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The roller-coaster ride in Next Digital’s stock price left many retail investors who bought at high price levels ruing huge losses, and highlighted the challenges regulators face in an age where public sentiment can be easily swayed through social-media posts.

“Those without regulatory qualifications calling on the public to buy a certain stock could be sued for the losses investors generated in the end,” said Angela Ho, lawyer and founder of law firm Angela Ho & Associates, which specialises in capital markets practices.

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