Sun Energy Group (02459) saw its share price plummet by over 99% during trading yesterday, hitting a low of HKD 0.14 per share. At 14:50 yesterday, the trading of Sun Energy Group was abruptly halted, with a drop of 98.4% before the suspension, leaving the market value at just HKD 328 million. The market value shrank by over 20 billion HKD in a single day.
In today's morning session, the stock resumed trading with a 47% increase. As of the time of writing, the increase stands at 40%, with the share price quoted at HKD 0.455, and the trading volume exceeding HKD 290 million.
In terms of news, yesterday the company announced that the Hong Kong Securities and Futures Commission (SFC) had pointed out that its shareholdings were overly concentrated. This morning, the company announced that some of the major shareholder's holdings were forcibly liquidated.
Margin Call
This morning, Sun Energy Group announced that the major shareholder, Otautahi Capital Inc, had a total of 370 million shares (approximately 36.64% of the company's total issued share capital as of the announcement date) forcibly sold by securities firms in the open market through margin security accounts on September 3rd.
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Following the completion of the forced sale and as of the announcement date, the number of shares held by Otautahi Capital Inc is 212.3 million, representing 21.02% of the company's issued share capital. The board of directors confirmed that the group maintains normal business operations, and there have been no significant changes in the group's business operations and financial condition.
Yesterday, Sun Energy Group traded 1.5072 billion shares, with a transaction volume of HKD 494 million, of which 370 million shares belonged to the major shareholder's forced liquidation. Judging from yesterday's trading range, the increased volume occurred after the sharp decline. It can be inferred that the significant drop in stock price led to the forced liquidation of the major shareholder's margin account.
Looking at past trends, Sun Energy Group is considered a "demon stock": On April 9th, the company's stock price fell by 49.88% in a single day, closing at HKD 2.1 per share, with a turnover rate of 0.1%. After this significant drop, the company's stock price began to steadily rise, reaching a high of HKD 21.30 per share on August 30th, becoming a ten-bagger stock.
Reduction in Holdings
Data shows that from April 30th to June 20th, the major shareholder Otautahi Capital Inc reduced its holdings in the company three times, cumulatively reducing 156.5 million shares, for a total of approximately HKD 601 million in cash, and the shareholding ratio decreased from 73.17% to 57.67%.At the same time, the company's performance has changed rapidly. The company went public in January 2023, and its operating income for the years 2021 and 2022 was $109 million and $116 million, respectively; the net profit attributable to the parent company was $4.388 million and $7.496 million, respectively.
After going public, in the first half of 2023 and 2024, the company achieved operating income of $72 million and $32 million, respectively, a year-on-year decline of 37.42% and 26.52%; the net loss attributable to the parent company was $15 million and $14 million, respectively.
In the mid-year financial report of 2024, Rising Energy Group stated that the decline in the company's performance was mainly affected by factors such as the downward trend of graphite electrode prices, inventory provisions, and the development of the graphite anode material business.
Before the IPO, Hou Haolong held 90.624% of the shares of Rising Energy Group through the family trust Otautahi Trust; Hou Haolong's brother-in-law owned 79.2% of Henan Sanli Carbon Group Co., Ltd., and an independent third party owned 20.8%.
Hou Haolong
Rising Energy Group produces ultra-high power graphite electrodes used in electric arc furnace steel manufacturing, etc. The associated company of Rising Energy Group, Henan Sanli Carbon Products Co., Ltd., has been listed as a dishonest executor by the court many times.
In 2002, Hou Haolong graduated from Golden Gate University in the United States with a master's degree in procurement and supply chain management. From January 2003 to January 2013, Hou Haolong was at Sanli Carbon, responsible for project implementation, including the production of large diameter ultra-high power graphite electrodes for electric arc furnace steel manufacturing.
On January 24, 2014, Hou Haolong, the legal representative and chairman of the original Sanli Carbon, resigned from the above positions and was succeeded by the company's senior manager, Niu Ping. The reason was that Hou Haolong needed to devote a lot of energy to business negotiations abroad and to carry out an international strategic layout.
In April 2012, Sanli Carbon had raised 5 million yuan from private lending, with a monthly interest rate of 2%, and the term was less than one month, guaranteed by Hou Haolong. In April 2013, Sanli Carbon repaid the principal of 4 million yuan, and the remaining 1 million yuan of principal and 1.24 million yuan of interest were not paid for a long time.
So in June of this year, the private lender filed a lawsuit against Sanli Carbon and Hou Haolong. The overdue financial institution loans of Sanli Carbon began to appear in the fourth quarter of 2013. In October 2012, Sanli Carbon borrowed 6 million yuan from Zhujiang Rural Commercial Bank in Huixian City, with a term of one year and a loan monthly interest rate of 1%. After the loan expired, Sanli Carbon was unable to repay the loan due to economic difficulties.Hou Haolong was born in 1978 and is currently 46 years old, holding the nationality of Vanuatu. Sheng Neng Group is located in Xinxiang, Henan, but the nationalities of its four executive directors are diverse, with the other three being from the United States, South Africa, and China.
Equity Concentration
Recently, Sheng Neng Group has been named by the Hong Kong Securities and Futures Commission (SFC) for having a highly concentrated equity structure.
The results show that as of August 19th of this year, the company had 25 shareholders who collectively held 279 million shares, which is equivalent to 27.65% of the issued share capital. Together with the 582.5 million shares held by a controlling shareholder (accounting for 57.67% of the issued share capital), and approximately 49.3095 million shares that are not settled in the Central Clearing and Settlement System or registered in the Hong Kong shareholder register (representing 4.88% of the issued share capital), the total already equates to 90.2% of the issued share capital of Sheng Neng Group. Consequently, only 98.9416 million shares (9.80% of the issued share capital) are held by other shareholders.
The SFC has previously disclosed the high concentration of equity in several companies, such as revealing that the equity concentration of Michael Group reached 99.04%; as of June 21st, Le Cang Logistics had 18 shareholders who collectively held 126 million shares of the company, equivalent to 44.11% of the issued share capital. The aforementioned shareholders, along with the company's three controlling shareholders who held 159 million shares (55.39% of the issued shares), accounted for 99.5% of the company's issued share capital. Additionally, only 1.69% of the shares of Chang Jiu Shares are held by other shareholders, with 98.31% of the shares concentrated in the hands of a few shareholders.
Regarding the issue of highly concentrated equity, Sheng Neng Group explained that there are no shares settled in the Central Clearing System, nor are there any shares registered in the company's Hong Kong shareholder register, as far as the company understands, referring to the shares settled in the Cayman Islands share transfer registration office.
Starting from April 2023, the company's independent director Sun Qing, executive director Adriaan Johannes Basson, executive director and CEO Wei-Ming Shen, and executive director Yan Haiting have successively resigned. In July 2023, the company's appointed auditing firm, Ernst & Young, also announced its resignation due to the inability to reach an agreement on audit fees.