What's going on? A stock plummets by 99% in half a day?

On the morning of September 3rd, the share price of Sun Energy Group plummeted, with a drop exceeding 99% during the trading session, reaching a low of 0.14 HKD per share. By the midday closing, the share price of Sun Energy Group was reported at 0.39 HKD per share, with a total market value of less than 400 million HKD.

Prior to this dramatic drop, Sun Energy Group had just set a historical high for its share price on August 30th, reaching 23.1 HKD per share.

After the market closed yesterday, the Securities and Futures Commission (SFC) of Hong Kong issued a statement regarding the high concentration of Sun Energy Group's shares.

The SFC pointed out that the inquiry results showed that on August 19th, 25 shareholders of Sun Energy Group collectively held nearly 280 million company shares, which is equivalent to 27.7% of the issued share capital.

The inquiry results also revealed that on August 19th, Sun Energy Group had a total of 49.309 million company shares (accounting for 4.9% of the issued share capital) that were not settled in the Central Clearing and Settlement System (CCASS), nor were they registered in the company's Hong Kong shareholder register. These shares, along with 580 million shares held by one controlling shareholder of the company (accounting for 57.7% of the issued share capital), are equivalent to 90.2% of the company's issued share capital. Therefore, only 98.942 million shares (accounting for 9.8% of the total issued share capital) of Sun Energy Group were held by other shareholders.

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In terms of share price, from May 2nd to August 19th, the closing price of Sun Energy Group's stock rose by 463% from 3.76 HKD to 21.15 HKD.

After the market closed on August 13th, Sun Energy Group issued a profit warning, estimating that the net loss attributable to the company's shareholders for the six months ending on June 30, 2024, would not exceed 165 million USD. For the six months ending on June 30, 2023, the net loss attributable to the company's shareholders was approximately 42 million USD.

On August 30th, the share price of Sun Energy Group closed at 21.3 HKD, a 466% increase from the closing price of 3.76 HKD on May 2nd.

The SFC warned that, given the high concentration of shares among a small number of shareholders, even a small volume of share transactions could lead to significant fluctuations in the company's share price. Shareholders and potential investors are advised to exercise caution when buying or selling shares of the company.It is worth noting that Suneng Group has recently been included in the MSCI Index. According to the quarterly review results announced by MSCI, Suneng Group was added to the MSCI Hong Kong Small Cap Index, and this change took effect after the stock market closed on August 30th. This positive news has also had a boosting effect on Suneng Group's stock price.

On the morning of September 3rd, Suneng Group also issued a notice to remind that: due to the high concentration of equity, there may not be a real market for the company's securities, or its equity may be concentrated in the hands of a few shareholders.

Regarding the issue of high equity concentration, Suneng Group explained that there are no shares held in the central clearing system, nor are there any shares registered in the company's Hong Kong shareholder register. According to the company's understanding, it refers to the shares held at the Cayman Islands Share Transfer Register.

Based on the Cayman Islands shareholder register and the information currently available to Suneng Group, as of August 19, 2024, the five shareholders at the Cayman Islands Share Transfer Register only held 42.6135 million shares (accounting for 4.22% of the issued shares). Together with the 582.4 million shares held by the company's controlling shareholders (accounting for 57.66% of the issued shares) and the 279 million shares held by 25 shareholders (accounting for 27.65% of the issued shares), the shares held by 31 shareholders in total are equivalent to 89.53% of the issued shares.

Public information shows that Suneng Group was established in June 2018 and landed on the main board of the Hong Kong Stock Exchange in January 2023. It is reported that Suneng Group is a global manufacturer of ultra-high power graphite electrodes, selling its products in the automotive, infrastructure, construction, electrical, machinery, equipment, and transportation industries.

According to the Frost & Sullivan report, Suneng Group ranked 9th among global ultra-high power graphite electrode manufacturers in 2019, with a market share of about 1.5%; it ranked 4th in the Chinese high-quality ultra-high power graphite electrode manufacturing market in 2019, with a market share of about 13.3% (calculated by output).

Previously, Suneng Group released its interim performance for 2024, with revenue of $32.101 million for the period, a year-on-year decrease of 26.5%; net loss was $14.368 million, an increase of 240.2% year-on-year.

Suneng Group stated that the reason for the year-on-year decrease in revenue was mainly due to the average selling price of graphite electrodes decreasing from about $4,549 per ton in the first half of 2023 to about $3,316 per ton in the first half of 2024. The demand for graphite electrodes remained at a low level in the first half of 2024, and the business environment faced persistent challenges. Against the backdrop of cautious steel production, the demand in the main markets of North America and Europe, where the group is primarily located, decreased due to customer inventory adjustments.