The world’s biggest solar technology company by market capitalisation got absolutely slaughtered this week.
Hanergy Thin Film Power is a Hong Kong-listed Chinese firm which has an astonishing boom story, which made its chairman China’s richest man.
But on Wednesday it went through the floor — the stock’s value was slashed nearly in half, falling 47% before trading was suspended.
The collapse came entirely out of the blue and investors are still scrambling for an answer — what caused Hanergy to crash?
Here’s everything we know so far about the company, its business model and the events on Wednesday.
The stock had surged by a ludicrous amount
Hanergy was one of the most explosive stocks in the world heading into Wednesday’s collapse.
On 19 May 2013, the stock was trading at 0.49 Hong Kong dollars (HKD) — about 6 six cents in US dollars or 4 pence in sterling. One year later it had more than doubled in price, rallying to 1.13 HKD ($US0.15, £0.09).
But the next year was even more impressive. By May 2015 it had surged to 7.37 HKD ($US0.95, £0.61) a climb of more than 550%. In the two year period as a whole, the stock had risen in value by about 1,400%.
Even by the standards of frothy Chinese equities, many of which have surged over the same period, Hanergy is a case apart. By market capitalisation it was about seven times the size of the biggest US solar company, according to Bloomberg.
People have repeatedly expressed doubts about the business model
Chairman Li Hejun has repeatedly expressed his consternation at the fact that the international business media find it hard to understand where Hanergy’s growth is coming from.
In January the Financial Times noted that Hanergy’s net profit margins were over 50%, but almost all of the company’s revenues were sales to Hanergy Group, the parent company. They noted that though Hanergy Thin Film reported USD $US347 million (£221.73 million) in sales in 2012, looking at the sales data from eight of the company’s nine factories only accounted for USD $US50 million (£31.95 million) of that — and that Hanergy would not provide information on the final factory.
Even back in 2012, the Chinese city of Haikou had a run-in with Hanergy. China’s Caixin reported that Hanergy promised billions of yuan in investment, along with jobs and tax revenue. At the time the local government refused to hand over the second portion of land it was meant to sell the company (at below-market value).
Later Gavin Jackson and Miles Johnson of the Financial Times investigated Hanergy’s share price, with a pretty astonishing discovery. Almost all of the surge in the stock had occurred during the last minutes of trading, to the extent that if you held shares in the company from the beginning of 2013, but hadn’t got any of the gains made in the last half an hour, you would have actually lost money.
It looked extremely dodgy.
Li Hejun’s no-show at Wednesday’s AGM.
The company’s annual general meeting (AGM) also came on Wednesday, the day of the collapse.
However, it’s not clear at all that this was the cause of the crash. Li’s fortune (he’s a competitor for the title of China’s richest man) is pretty much entirely linked to Hanergy. He lost $US15 billion (£9.58 billion) when the stock tumbled.
Hanergy Group maintained in a statement that Li was busy in Beijing (the AGM was held in Hong Kong):
On 20 May 2015, Hanergy Holding Group Chairman Li Hejun attended the opening ceremony of the Hanergy Renewable Energy Exhibition Center in Beijing. It is the world’s first exhibition center dedicated to renewable energy, with a solar focus. Mr. Li delivered a speech entitled “Change the World with Clean Power.”
Goldin Property Holdings, another Hong Kong-listed Chinese company with an astonishing boom story, lost more than two thirds of its value on Thursday. There’s one link between the two companies — the solar giant appointed Goldin as a financial adviser just a few months ago.
That is pretty much the limit of what we know about the collapse. If Li’s non-appearance at the meeting (or in fact anything the occurred at the meeting at all) had something to do with the collapse, we’re still none the wiser more than 24 hours later. The company insists it’s in good financial shape, to the incredulity of pretty much everyone.
What we know is that Hanergy was one of the fastest-growing companies in one of the world’s boom sectors, standing out as a strange example even in a country where stocks are generally exploding upwards. We know people asked questions about the opaque business model and the bizarre timing of the stock’s rally — but the crash remains a mystery.