It's been a long time coming -- more than three years -- but an end could be in sight for Hanergy Thin Film Power Group's paralysed shareholders, even if it is not quite the solution that the Hong Kong regulator may have had in mind.
With trading in the shares suspended since 2015, parent Hanergy Holding Group is now looking to break the deadlock with a HK$21 billion ($26.7 billion) take-private offer.
The Chinese solar equipment maker, which announced the proposal on Tuesday through the website of its subsidiary Hanergy Mobile Energy, said it will offer HK$5 per share of Hanergy Thin Film.
The offer price is about 28% higher than its last traded price of HK$3.91, before the shares were suspended by Hong Kong’s Securities and Futures Commission.
Hanergy said the proposal was unanimously accepted by the board of directors of the listed company.
However, the listed company has yet to formally announce it has received any buyout offer, which is somewhat unusual. It is also uncertain whether any take-private offer can proceed while Hanergy Thin Film remains the subject of an investigation by the securities regulator over alleged market manipulation.
Privately held Hanergy Thin Film was once a high-flying company seen at the forefront of China’s green energy push with its pioneer thin-film solar technology.
The little-known company became the centre of investor attention when its Hong Kong shares skyrocketed over six times between November 2014 and May 2015, giving it a market capitalisation greater than all the other listed Chinese solar companies combined.
But the investment frenzy in Hanergy Thin Film came to an abrupt stop on May 20, 2015, after its shares sank 47% in minutes. Trading in the company's shares has been suspended ever since then.
OPAQUE BUSINESS MODEL
Hong Kong’s securities regulator officially started an investigation into Hanergy in July that year over the company’s murky business model. The listed company was criticised for being heavily involved in connected party transactions with its parent, Hanergy Holding Group.
The financial statements of Hanergy Thin Film showed it generated all its revenue from selling equipment to its parent in 2013, and 98.7% of its revenue in 2014.
As a result of these connected transactions, the company’s auditor Ernst & Young said it was unable to obtain “sufficient appropriate audit evidence” on the recoverability of part of the trade receivables owed and the amount due from customers.
Hanergy Thin Film also became the first company to be removed from the Shanghai-Hong Kong stock connect scheme in July 2015.
In September last year, the securities regulator banned Hanergy’s founding chairman Li Hejun from management of any Hong Kong company for eight years. Its stated reasons for disqualifying Li included his failure to disclose an intra-company loan and recover receivables incurred by Hanergy Holding Group.
Hanergy Holding Group said its new take-private offer aimed to protect the interests of smaller shareholders and that it plans to relist the company on the mainland Chinese stock market.