The financial regulator of Hong Kong has ordered the freezing of over HKD 4.6 billion, marking the largest asset freeze in the regulator's history, following allegations of manipulation in initial public offerings.
As disclosed by the Securities and Futures Commission (SFC) of Hong Kong in a statement on Monday, this historic measure, valued at €523.1 million, occurred simultaneously with the suspension of trading for the popular Chinese bubble tea chain, Chabaidao (Sichuan Baicha Baidao Industrial).
Chabaidao, headquartered in Chengdu, Sichuan province, and ranked as the third-largest manufacturer of these beverages in China by sales value, raised HKD 2.46 billion (equivalent to €279 million) during its stock market debut in April 2024.
The SFC also suspended the listings of the biopharmaceutical company Cloudbreak Pharma and the technology company Tianju Dihe after identifying irregularities in their respective capital market entries.
The investigation suggests that both groups are suspected of generating artificial demand for shares during the IPOs and diverting part of the raised funds to alleged investments in financial instruments.
Subsequently, this capital was reportedly redirected to the main subscribers of the initial public offerings or entities related to them, enabling the repurchase of shares in the secondary market and the consequent artificial inflation of prices, according to the official statement.
Before the suspension, Chabaidao's shares showed an accumulated depreciation of 77% compared to their initial listing price.
The regulatory body of the special administrative region neighboring Macau issued restriction orders against 35 brokers, resulting in the freezing of approximately HKD 4.38 billion (€498 million) in the scheme associated with Chabaidao and Cloudbreak, allegedly under the control of Sun Ran and eight related companies.
Additionally, another HKD 285 million (€32 million) is held in the investor Liu Haoran's accounts, related to Tianju Dihe and distributed across twenty-nine brokers.
Julia Leung, Executive Director of the SFC, warned about maintaining a zero-tolerance policy against the creation of artificial markets, mentioning the possibility of restitution proceedings for affected retail investors.
This action is part of a Hong Kong securities market surveillance campaign, in which the SFC has already vetoed or suspended 65 listing applications since the beginning of the year due to documentation failures provided by those responsible for the IPO processes.