It's not everyday that a stock loses more than 98% of its value, but for one Hong Kong listed company, it was one of those days.
A worker stands in front of a furnace in the production area of the Zhong Tian (Zenith) Steel Group Corporation on May 12, 2016 in Changzhou, Jiangsu. Sanergy Group, the world’s seventh largest manufacturer of graphite electrodes used in steel production, saw its stock price drop 98%.
Sanergy Group Ltd, which describes itself as a "a global leading manufacturer of ultra-high power graphite electrodes," saw its share price slip by a whopping 98.4% on Tuesday after Hong Kong's market regulator issued a warning about the company.
In a statement, Hong Kong's Securities and Futures Commission warned investors that just 26 shareholders own 85.32% of Sanergy Group's shares, meaning the stock could "fluctuate substantially even with a small number of shares traded."
And fluctuate it did.
The SFC's announcement in turn sparked a meltdown in Sanergy's stock price that saw its market capitalization drop from more than HK$ 20.8 billion ($2.7 billion) on Monday to just HK$328 million on Tuesday.
On its website, Sanergy Group describes itself as "a global leading manufacturer of ultra-high power graphite electrodes and Europe's leading manufacturer of graphite anode materials" used to support "the low-carbon transformation of the steel and energy industries."
Sanergy Group (HK:2459), which is headquartered in Xinxiang City in China's Henan province, was first started in 2012 with production bases in both Europe and China before it was floated on the Main Board of the Hong Kong Stock Exchange in 2023.
Its stock surged by more than 1,190% in the year-and-a-half period running from its initial public offering on Jan. 20, 2023 to Aug. 30 2024.
By mid-session, its shares were suspended.
A New Zealand investment firm, Otautahi Capital, is listed by the Hong Kong Stock Exchange as owning 57.67% of Sanergy Group's shares. Otautahi Capital is itself 100% owned by Otautahi Holdings Ltd, which is itself 100% owned by Otautahi Enterprises Trust.
Otautahi Enterprises Trust is a discretionary trust established by another company, Otautahi Enterprises Trust Company Limited, which counts Sanergy Group board member Hou Haolong as an executive director.
Hou Haolong is the brother-in-law of Sanergy Group chief technology officer Feng Jianguo, filings to the Hong Kong Stock Exchange show.
Another 27.65% of Sanergy Group's shares are owned by a group of just 25 shareholders, while another 4.88% of the company's stock is being held outside the Hong Kong stock market's systems. As such, just 9.8% of all shares in Sanergy Group are currently in the hands of other shareholders.
In August, Sanergy Group issued a profit warning in which the company said it expected to make a loss of up to $16.5 million in the first half of 2024, compared to a $4.2 million loss in the same period last year.
The Chinese company says on its website that it is the world's seventh largest manufacturer of ultra-high power graphite electrodes that are used in electric furnaces used for recycling steel. Sanergy Group also says it is China's fourth largest premium ultra-high power graphite electrode manufacturer.
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