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this hong kong stock has fallen quite badly!

today, the worst-performing stock in the hong kong stock market is sunac china holdings limited (2459.hk). after the hong kong securities regulatory commission pointed out that its equity was highly concentrated, this stock plummeted by more than 99% during intraday trading, and its market value shrank sharply from more than 20 billion hong kong dollars to less than 200 million hong kong dollars.

before the recent plunge, shengneng group was a bull stock. in just four months from the end of april to the end of august, shengneng group's share price rose more than five times, reaching a peak of hk$23.1 per share, with a market value of more than hk$23 billion. recently, shengneng group was also included in the msci hong kong small cap index and the hang seng composite index.

what kind of company is shengneng group?

a 99% plunge

in the morning trading today, the share price of shengneng group (2459.hk) opened low and continued to fall. the maximum intraday decline of the stock exceeded 99%, and the market value once shrank to hk$180 million. as of 2 pm, the share price of shengneng group was still down by more than 98%.

the factor that triggered the company's stock price to plummet was an announcement of highly concentrated equity. an announcement on the evening of september 2 showed that shengneng group was named by the hong kong securities regulatory commission as having a highly concentrated equity.

it is reported that the hong kong securities and futures commission recently conducted an inquiry into the company's equity distribution. the results of the hong kong securities and futures commission's investigation showed that as of august 19 this year, the company had 25 shareholders holding a total of 279 million shares, equivalent to 27.65% of the issued share capital. together with 582.5 million shares held by a controlling shareholder (accounting for 57.67% of the issued share capital), and approximately 49.31 million shares (accounting for 4.88% of the issued share capital) that are not deposited in the central clearing and settlement system or registered in the hong kong shareholder register, the total is equivalent to 90.2% of the issued share capital of shengneng group. therefore, only 98.94 million shares (accounting for 9.8% of the issued share capital) of shengneng group are held by other shareholders.

the hong kong securities and futures commission also mentioned the recent abnormal fluctuations in the company's stock price. between may 2 and august 19, the closing price of the company's shares rose 463% from hk$3.76 to hk$21.15. after the close of trading on august 13, the company issued a profit warning, expecting a net loss attributable to the owners of the company of no more than us$16.5 million in the first half of this year, compared with a net loss of approximately us$4.2 million in the same period last year; on august 30, the company's stock price closed at hk$21.3, up 466% from the closing price of hk$3.76 on may 2.

the hong kong securities and futures commission pointed out that given the high concentration of equity among a small number of shareholders, even if a small number of shares are traded, the share price may fluctuate significantly, and reminded shareholders and potential investors to act prudently when buying and selling.

on the morning of september 3, shengneng group responded that according to available information and to the best of the knowledge of the directors after making all reasonable inquiries, the directors confirmed that as of august 19, 2024 and the date of this announcement, no less than 25% of the issued shares are held by the public, and the company has maintained sufficient public shareholding in accordance with the requirements of the securities listing rules of the stock exchange. given that the equity is highly concentrated in a small number of shareholders, even if a small number of shares are traded, the share price may fluctuate significantly. shareholders and potential investors are advised to act prudently when buying and selling shares. in addition, due to the high concentration of equity, the company's securities may not have a real market, or its equity may be concentrated in the hands of a few shareholders.

it is worth noting that recently, shengneng group has been included in multiple indexes. according to the quarterly review results released by msci, shengneng group was included in the msci hong kong small cap index, and this change took effect after the stock market closed on august 30. stimulated by this news, shengneng group's share price hit a record high on august 30, with the share price once reaching hk$23.10. in addition, shengneng group was selected by hang seng indexes company limited on august 16 and included in the hang seng composite index constituent stocks, which will take effect from september 9.

what’s the origin?

according to public information, shengneng group is a manufacturer of ultra-high power (uhp) graphite electrodes. the company's customer base covers more than 25 countries around the world, including major global electric arc furnace steel manufacturers in the americas, emea, asia pacific and china. they sell their products in the automotive, infrastructure, construction, electrical, machinery, equipment and transportation industries.

according to the official website of shengneng group, the company started the graphite electrode business through the "sangraf" brand and has now become the world's seventh largest ultra-high power graphite electrode manufacturer and china's fourth largest high-quality ultra-high power graphite electrode manufacturer. the group has expanded its graphite negative electrode material business through its sub-brand "sanode", strategically invested in the two major trade hubs in europe and asia, and plans to establish graphite negative electrode material production bases in italy and china respectively, relying on the group's global customer network to meet the growing market demand for graphite negative electrode materials.

in january 2023, shengneng group was listed on the main board of the hong kong stock exchange. at that time, the stock price did not fluctuate significantly. it was not until mid-may 2023 that shengneng group's stock price began a months-long upward journey. from mid-may 2023 to the end of december 2023, the company's stock price rose from hk$1.8 to hk$10.2, with the highest increase of more than 460%. subsequently, the company's stock price adjusted for nearly 5 months until a new round of bull market started at the end of april.

financial report data shows that in recent years, shengneng group's performance has fluctuated greatly. in 2023, shengneng group's revenue was us$72.29 million, a year-on-year decrease of 37.4%. shengneng group explained that this was mainly due to weak customer demand and destocking of the downstream supply chain. during this period, the company's graphite electrode sales decreased by 29.6% compared with 2022. in 2023, the company's net loss was approximately us$15.5 million, mainly due to a significant decrease in gross profit, a moderate increase in administrative expenses, and an increase in financial costs.

the 2024 interim results show that shengneng group's revenue in the first half of the year was us$32.1 million, a year-on-year decrease of 26.5%; its net loss was us$14.368 million, compared with a loss of us$4.224 million in the same period last year. in the first half of the year, the company's average selling price of graphite electrodes fell by about 27.1% from the same period last year.

shengneng group said that in the first half of 2024, the market demand for graphite electrodes continued to be at a low level, reflecting that global economic uncertainty continued to affect steel industry production and the business environment faced lasting challenges. against the backdrop of cautious steel production, affected by customer inventory adjustments, demand in the group's major markets such as north america and europe decreased.

looking ahead to the second half of 2024, shengneng group expects the market environment to remain challenging, but the company remains optimistic about future business prospects and continues to advance its business plans in order to better seize business opportunities when the industry regains momentum. shengneng group said that the global carbon neutrality background remains the growth driver for the group in the medium and long term. shengneng group said that global steelmaking capacity is expected to increase from 2024 to 2025, and the surge in electric arc furnace projects will increase demand for graphite electrodes.