Hanergy Thin Film to return to China listing ahead of results of inquiry

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It appears Hong Kong-registered rollercoaster stock Hanergy Thin Film is not prepared to wait for the exchange’s decision on whether it can lift a ban on trading its shares that has been in place since May 2015.

China-based parent company Hanergy Mobile Energy Holding Group announced this morning it intends to take back its controversial Hong Kong unit into private ownership, with the aim of listing it on China’s A-share exchange instead.

In a statement on its website, the parent company said the move will be taken “to protect the interest of middle and small shareholders”. And protect such shareholders it will, with the parent offering HK$5 per share (US$0.64/share). That values the Hong Kong unit at around HK$210.73 billion, compared to the HK$164.8bn valuation the business had slumped to when its shares were suspended.

That ban, of course, followed revelations the apparently booming thin film business was basing its spectacular growth on huge orders from its parent company, orders which – as revealed in a telling section of Hanergy Thin Film’s recent first-half figures – were seldom fulfilled on anything like the scale envisaged.

Shareholders given a way out

The uncovering of the extent of the Hanergy Group’s intra-unit trading shenanigans prompted a spectacular 47%, one day – actually a 24-minute, blink-and-you’ll-miss-it, according to Reuters – share price plunge that prompted the Hong Kong exchange to halt trading.

Hanergy Thin Film would have the world believe it had very much turned the corner this year, as it trumpeted an impressive set of figures for the first six months of 2018.

Pv magazine analysis, however, showed the lion’s share of the company’s income was now based on a strategy of supplying high-earning thin film production equipment to industrial parks being developed around China – a process which involved first paying out for significant shareholdings in the industrial parks concerned. Ominously for investors, the cash supplied for those crucial, enabling stakes came not from Hanergy Thin Film, but from unspecified “Hanergy affiliates”.

The fact the Hong Kong unit’s valuation has soared almost 28% would appear to justify the claim Hanergy is back on track, and shareholders stuck with a holding shrouded in controversy for three years are unlikely to care much that, in characteristic Hanergy fashion, the parent company’s statement specifies the take-private transaction will be funded by “stock replacement”, as well as cash. It would be revealing to know what portion of each occurs in the final shakeout.

Has Hanergy jumped before it was pushed?

In terms of the Hong Kong listing’s investigation, shareholders were told in the first-half figures update released in September, that Hanergy Thin Film was “responding and addressing to the issues and concerns raised by the SFC [Hong Kong Securities and Futures Commission] in respect to the disclosure document” which Hanergy had submitted to the exchange outlining its “activities, businesses, assets, liabilities, financial performance and prospects”. With Reuters reporting today that a response to those Hanergy submissions was expected “within weeks”, it appears shareholders will never know the exchange’s verdict.

Hanergy thin film can at least anticipate slightly less scrutiny, at least from troublesome overseas media, when it transfers to the Chinese A-share index, and today’s dramatic development could partly explain why pv magazine yesterday received a polite request from a Hanergy representative asking to check the “tonality” of the article published about its BIPV HanWall product.

The media spotlight is likely to move away from the Humbrella, HanTile and HanWall today, and back to the exchanges.