On September 3, Ascend Group rapidly declined in the Hong Kong stock market after the opening, with the percentage dropping by 99% by 11 a.m. Earlier, the company’s stock price had surged tenfold in four months.
Specializing in the manufacturing of graphite electrodes and graphite anodes, Ascend Group’s stock plummeted quickly after the opening of the Hong Kong stock market on the 3rd, dropping 99% by 11 a.m. to a low of 0.14 Hong Kong dollars per share before stabilizing.
Subsequently, Ascend Group announced that its stock would be temporarily suspended from trading starting at 2:50 p.m. on the same day. Within one trading day, Ascend Group’s stock price crashed from 18.98 Hong Kong dollars per share to 0.325 Hong Kong dollars per share. The total market value shrank from 20.453 billion Hong Kong dollars to 3.28 billion Hong Kong dollars, with a record trading volume of 1,507 million shares on that day.
According to a financial article by mainland Chinese media on September 3, the trigger for Ascend Group’s sharp decline may be related to the regulation by the Hong Kong Stock Exchange.
On the evening of September 2, Ascend Group issued a statement revealing that the Hong Kong Securities and Futures Commission had recently inquired about the company’s shareholding distribution.
In a warning letter issued by the Hong Kong Securities and Futures Commission, it was noted that as of August 19, 2024, 25 shareholders held 27.65% of Ascend Group’s issued shares, with the controlling shareholder Otautahi Capital Inc holding 57.67% of the shares. Additionally, 4.88% of the shares were not settled in the Central Clearing and Settlement System, nor were they registered in the company’s Hong Kong shareholder register. Consequently, only 9.8% of Ascend Group’s shares were held by other investors in the market.
The high concentration of shareholding increases the risk of price manipulation. The warning letter advised that due to the high concentration of shares among a small number of shareholders, even a small amount of trading could lead to significant fluctuations in the company’s stock price, urging shareholders and prospective investors to act prudently when trading the company’s shares.
A senior investor in Hong Kong’s stock market told “First Financial” that “deviation of stock price from fundamentals and divergence from industry trends are dangerous signals. Particularly in stocks with a high concentration of shareholding, one should beware of suspected market manipulation.”
“In stocks with a high degree of share concentration, manipulators can operate at lower costs,” remarked an industry insider. In the Hong Kong stock market, “market manipulators” typically opt for low-priced rights issues. In stocks with high share concentration, a small number of shares can cause rapid price changes, allowing them to drive up prices while selling to retail investors in the secondary market.
Ascending Group saw its stock price rise from a low of 1.97 Hong Kong dollars per share in April to over 21.3 Hong Kong dollars per share in four months, a more than tenfold increase.
However, the soaring stock price did not reflect the company’s performance. After the market closed on August 13, 2024, Ascend Group issued a profit warning, expecting a net loss attributable to owners of the company of no more than 16.5 million US dollars for the six months ending June 30, 2024, compared to around 4.2 million US dollars in the corresponding period of the previous year.
Throughout the skyrocketing process of Ascend Group’s stock price, major shareholder and entrepreneur from Henan, Ho Haolong, engaged in significant cashing out. Since the beginning of 2024, Ho Haolong had increased his holdings by a total of 9 million shares but reduced them by 156.5 million shares.
Established on June 26, 2018, Ascend Group is headquartered in the Hui County Industrial Concentration Zone, Hongzhou Industrial Park in Xinxing City, Henan Province, China. It is a global manufacturer of ultra-high-power graphite electrodes, serving customers in over 25 countries worldwide, primarily in the electric arc furnace steel manufacturing sector. The company sells its products in industries such as automotive, infrastructure, construction, electrical, machinery, equipment, and transportation.