On May 20, the big Chinese leader in solar panels Hanergy Holding Group (HKG: 0566) has seen an unprecedented and sudden drop in its share value. In a matter of mere minutes, the company’s stock price decline by 47% before it was suspended from trading, losing US$19 billion in value. That same day, Li Hejun, the Chairman, had bought 54.5 million shares. This drop wiped out the profits it had made over the past 4 months that had made it more valuable than Sony Corp. in Japan. Its lead investors and analysts ask themselves, “why was the price increasing in the first place? “
That same day, Chairman Li Hejun had bought 54.5 million shares. He is now under investigation by the Hong Kong Securities and Futures Commission, which has been probing market manipulation in Hanergy’s stocks over the past several weeks.
This unexpected and sudden event has all of Hanergy’s investors worried. Lenders exposed to Hanergy Thin Film Power Group Ltd and its parent company are many. Some of them, such as the Hong Kong unit of the Industrial and Commercial Bank of China, is owed tens of millions of dollars. The latter is among the 11 banks that lent 82 billion yuan to Hanergy.
This loan was obtained in December, and is backed by a standby letter of credit from the Export-Import Bank of China. Li Hejun had also made financial deals with various local and provincial governments. In addition, it’s taken loans up to 100 million yuan from online micro financer Itouzi and another 18.5 yuan million from Jimubox.
In the wake up the disaster, the banks have asked for a meeting to raise their concerns, which they have yet to get a response, according to unidentified sources as they aren’t authorized to speak publicly. Furthermore, two calls to the office in Beijing were not answered and no immediate reply was received for an emailed request for comment.
“The interesting thing with Hanergy is that so much is happening with the parent company that investors know nothing about,” said Charles Yonts, an analyst with CLSA Asia-Pacific Markets in Hong Kong. “The opacity about parent finances and billings is extraordinary.”
Since the Hong Kong unit’s stock surged last year, a variety of financing sources were tapped into such as policy-bank lending, partnerships with local governments and short-term loans from online lenders.
The list of Hanergy’s lenders include two firms set up to manage banks’ bad assets, China Everbright Bank Co Ltd and China Minsheng Banking Corp, as well as Harvest Fund Management Co which is one of the country’s biggest fund managers with assets worth over US$55 billion.