Markets Mar 04

Zhongtai Auto’s ‘GameStop-style' stock rise causes concern

Shenzhen Stock Exchange demands answers from company over its share rise over the past 11 trading days; it wants details on 310 million yuan taken by controlling shareholder, Tieniu Group, and information on any major change to its fundamentals

Zhongtai Auto’s ‘GameStop-style' stock rise causes concern
Shenzhen Stock Exchange is seeking reasons why the company's shares have shot up over the past 2 weeks. AFP photo.

(ATF) On Wednesday (March 3), shares of China's ST Zotye – Zhongtai Auto – once again hit the daily trading limit. This has been happened to the stock for 11 consecutive trading days. Its stock price has risen by more than 70%, making it the hottest item in the country's markets currently.

In the evening, the Shenzhen Stock Exchange issued a letter of concern to *ST Zotye, asking the firm to verify and explain whether the company's recent stock price rises match the company's fundamentals.

*ST Zotye previously disclosed its performance forecast and stated that the net profit attributable to shareholders of listed companies in 2020 is expected to be a loss of 6 to 9 billion yuan.

The main reason for the loss was the production bases of its subsidiaries were basically suspended or in a state of semi-stop production. The company's main product, complete vehicles, produced and sold, did not see much business, and the total sales revenue was low. 

At the same time, the company plans to withdraw a large amount of asset impairment reserves and bad debt reserves totalling about 3.5 billion to 6.5 billion yuan.

'Please explain'

The Shenzhen Stock Exchange wants the company to explain whether its fundamentals and main business have undergone change or are expected to undergo major changes. It wants to know whether the company if major changes occurred in the state of suspension or semi-discontinuation of production, and if so, to explain the specific circumstances.

The Shenzhen Exchange said the company’s controlling shareholder, Tieniu Group, has yet to resolve the whereabouts of 310 million yuan of non-operating funds from the company, and Tieniu Group’s commitment to the company’s large performance compensation for 2018 and 2019 has not been fulfilled.

The company's announcement showed that Tieniu Group had been declared bankrupt by the People's Court of Yongkang City in Zhejiang Province and was unable to repay performance compensation.

The Shenzhen Stock Exchange requested the company to explain whether Tieniu Group's seizure of 310 million yuan of ST Zotye's non-operating funds is the total amount that it took, whether there has been any further (discovered) seizure of non-operating funds or if the company was given illegal guarantees. 

It wants details on specific measures that ST Zotye has taken or plans to take to safeguard its own interests and the legitimate rights and interests of small and medium shareholders.

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China Zhongtai Auto shares soar Shenzhen Stock Exchange Please explain notice Tieniu Group Controlling shareholder ST Zoyte