The Hong Kong bourse has asked Hanergy Thin Film Power Group (HTF) to hand over its Chinese parent company’s accounts before it will let the suspended stock trade again, but HTF is resisting the request, sources said.
Two sources familiar with the matter said HTF is studying a proposal that as an alternative to disclosing the parent company accounts to Hong Kong Exchanges and Clearing Ltd (HKEx), HTF could buy parts of its parent, Hanergy Holding.
Hanergy Holding, which buys solar panel making machines from HTF and then makes solar panels for sale to third parties, accounted for two-thirds of HTF’s sales last year. Analysts say that makes HTF overly dependent on group sales, and since unlisted Hanergy Holding doesn’t publish accounts, it is impossible to know whether there is independent demand for the end product.
The proposal from HTF would bring the entire supply chain and ultimate sale of solar panels into its own books, the sources said.
“This plan is being offered as a solution, and the company will proceed with the purchase if HKEx approves it. This will resolve the problem of (connected transactions),” one of the sources said.
HTF and Hanergy Holding declined to comment, and HKEx said it does not comment on individual cases.
Shares in HTF have been suspended since May 20, when they crashed 47 percent within an hour, having leaped sixfold in the previous eight months to $40 billion, making founder Li Hejun China’s richest man.
Two sources with knowledge of the situation said Hong Kong wanted to see Hanergy Holding’s books so it could judge whether HTF has a sustainable business model before allowing its shares to resume trading.
The stand-off demonstrates a broader problem that regulators around the world face in obtaining adequate disclosure from Chinese companies operating in their patch, and in evaluating their governance standards, whether for investor protection or matters such as money-laundering controls.
The problem is particularly acute for authorities in Hong Kong, where many Chinese companies have secondary listings or listed units.
HTF is also under investigation by Hong Kong’s Securities and Futures Commission (SFC), which a source familiar with the situation has said is looking into possible market manipulation by unnamed parties during the stock’s rapid rise.
The SFC and HTF have declined to comment on the nature of the investigation.