Hong Kong’s markets regulator confirmed it’s investigating Hanergy Thin Film Power Group Ltd., brushing aside a denial from the chairman of the solar company that a probe was underway.
“A formal investigation into the affairs of Hanergy Thin Film Power Group Ltd. has been active and is continuing,” the Securities & Futures Commission said Thursday in a statement.
It’s rare for the SFC to discuss a probe before a formal prosecution is launched. It came hours after Li Hejun, founder and principle shareholder of Hanergy, gave an interview to the Xinhua news agency saying that he wasn’t aware of any probe into the stock and that if there was one he should know.
“It’s unusual because all SFC investigations are supposed to be confidential and everybody under investigation has a secrecy obligation,” said Eric Seto, a partner at Morley, Chow, Seto Solicitors, who works on criminal SFC prosecution cases.
Hanergy is under the spotlight after its shares crashed on May 20, tumbling almost 50 percent in about half an hour before trading was suspended. The company’s market value at one point before the plunge exceeded HK$300 billion ($39 billion) more than the value of household names such as Sony Corp. and Twitter Inc.
The SFC has broken its silence on at least one other occasion, in March 2009 when it announced an ongoing investigation into the trading of HSBC Holdings PLC shares.
Li has drawn criticism for skipping Hanergy’s annual general meeting in Hong Kong on the day of the crash in favor of delivering a speech at the opening of a solar exhibition center in Beijing.
Even before Hanergy Thin Film’s shares plunged, the solar manufacturer’s business model was under scrutiny. Hanergy makes thin-film solar panels using equipment from Hanergy Thin Film. In January, the Financial Times newspaper questioned why the bulk of Hanergy Thin Film’s sales were to the Beijing-based parent, Hanergy Holding Group Ltd.
Trading patterns in Hanergy’s shares, the company’s production levels, borrowings and relationships with lenders have also been questioned.
Hanergy’s shares are currently halted in Hong Kong, and Hanergy Thin Film has yet to officially address the decline.
Even with Hanergy’s decline, the company is still valued at HK$163 billion, more than four times bigger than First Solar Inc., the biggest U.S. solar company using thin-film technology. First Solar and Japan’s Solar Frontier K.K. dominate the market for thin-film solar cells.
In an interview in March, Li called the company’s investments cautious and said the run-up in the stock was validation of the solar-maker’s focus on a new era of mobile energy.
“All of our plants, if reporters can go and see, are putting on extra shifts and are in full production,” Li said in the Xinhua interview. “We’re in big production. It’s very, very, very good. Hanergy is in its best shape since it started.”