Company blames 'forced sale' for wipeout that saw 98% share-price dive

By Louis Goss

Sanergy Group shares sees big percentage gain but not nearly a recovery

Sanergy Group, the Hong Kong listed company, which saw its share price plummet 98% on Tuesday, has blamed the meltdown on a forced stock sale that saw its largest shareholder sell a 36.64% stake in the firm.

The Chinese company, which describes itself as "Europe's leading manufacturer of graphite anode materials," saw its stock price crash on Tuesday after Hong Kong's market regulator raised concerns about its shareholders.

In a statement published on Wednesday, Sanergy Group has now blamed the 98.4% slump on a "forced sale" that saw its top shareholder Otautahi Capital sell 370 million shares in the company, in what saw its stake drop from 57.67% to 21.02%.

Otautahi Capital's shares "were forcibly sold in the open market by securities companies through margin securities accounts," Sanergy Group explained. Forced sales typically occur when the value of shares, that are being used as collateral for loans, suddenly drop.

Trading in Sanergy Group's shares on the Hong Kong Stock Exchange was subsequently halted at 2:50 pm on Tuesday at the Chinese company's request, before trading was restarted at 9 a.m. on Wednesday, Sanergy Group said in its statement.

Sanergy Group (HK:2459) shares, listed on the Hong Kong Stock Exchange, increased 78% on Wednesday in a rebound from Tuesday's crash. Stock in Sanergy Group remains down 93% in the year-to-date.

The meltdown in its stock price saw Sanergy Group's valuation plunge from HK$20.8 billion ($2.7 billion) on Monday to just HK$328 million on Tuesday.

The Xinxiang City headquartered company saw its share price fall sharply after Hong Kong's Securities and Futures Commission warned investors that just 26 shareholders owned 85.32% of the company's stock, meaning its share price could "fluctuate substantially."

Otautahi Capital, which is registered in the British Virgin Islands, was listed by the SFC as Sanergy Group's top shareholder with a majority stake in the company. Another 25 shareholders were listed as owning a further 27.65% of the company.

Otautahi Capital is itself fully owned by New Zealand registered Otautahi Holdings Ltd., which is itself 100% owned by Otautahi Enterprises Trust - a beneficiary trust which counts Sanergy Group executive director Hou Haolong as its own executive director.

Otautahi Enterprises Trust lists its registered address with the Hong Kong Stock Exchange to a single-story bungalow in the town of Rolleston, New Zealand - a suburban town 14 miles south-west of Christchurch that has a population of 29,600 people.

Sanergy Group describes itself on its website as "the world's seventh-largest manufacturer of ultra-high power graphite electrodes and the fourth-largest premium ultra-high power graphite electrode manufacturer in China."

The company, which has production bases in both China and Italy, was floated on the Hong Kong Stock Exchange in January 2023 before experiencing a sharp 1,190% surge in its share price in the more than year-and-a-half period that ended last week.

Sanergy Group was contacted by MarketWatch for comment.

-Louis Goss

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09-04-24 0650ET

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