Shares of Shanghai Pharmaceuticals, a leading mainland drug maker and distributor, fell 24 per cent to a record low in Hong Kong after a mainland newspaper reported a fraud investigation into the company.
State-owned Shanghai Pharmaceuticals closed at HK$9.11 - less than half its initial public offering price of HK$23 a year ago - after the shares dropped as much as 35 per cent yesterday.
The company listed in Hong Kong a year ago, becoming the first pharmaceutical company listed in both Shanghai and Hong Kong. Its A shares in Shanghai fell 10 per cent, the daily limit, to 10.75 yuan (HK$13.20) at the close of trading yesterday.
Shanghai Pharmaceuticals was being investigated by the Hong Kong stock exchange and the China Securities Regulatory Commission (CSRC) on suspicion of financial fraud involving two acquisitions earlier this year, the 21st Century Business Herald reported yesterday, citing an unidentified company executive.
The company said in a statement to the Hong Kong stock exchange last night that directors knew of no explanation for the share price drop.
Responding to the Herald's report, the firm said it had not received notice of any investigation by either the stock exchange or the CSRC.
Johnson Sun, an analyst at Guotai Junan (Hong Kong), said infighting within the state-owned company could have led to the fraud report. Sun said he was more concerned about corporate governance at Shanghai Pharmaceuticals than accounting issues.