Hanergy boss Li Hejun had doubled short position over six months

The chairman of Hanergy Thin Film Power over the past six months more than doubled his short position on the solar energy's firm's Hong Kong-listed shares that crashed last week, regulatory filings reveal.

That trajectory came to an abrupt halt on Wednesday when the stock plunged 47 per cent to HK$7.37 in just 70 minutes of trading before a suspension was announced. The share price had almost tripled this year. The filing to the stock exchanged cited the pending release of inside information on the company.

Robert Halili, the chairman of financial data provider Asia Insider, notes that Li - who saw his fortune shrink by HK$100 billion in the sell-off, along with the loss of the Hurun rich list crown - last made a declared purchase of Hanergy shares from May 11 to 18 at an average of HK$7.26 each for 28.4 million shares.

Halili, a columnist for the South China Morning Post, says regulatory filings show that Li had increased his short position by 123 per cent since late December last year to 7.71 per cent of Hanergy's issued capital.

The filings showed that Li's short position had stood at 2.42 billion shares or 5.81 per cent of the issued capital from late December until May 17, Halili said. Last Monday, Li raised this position by 796 million shares. This meant his short position by the time of the trading halt had ballooned to 3.217 billion shares, or 7.71 per cent of the issued capital.

Li had also increased his long position, by 73 million shares, from April 17 to last Monday. The on-market purchases were made at an average of HK$7.03 each. The trades boosted his stake to 33.707 billion shares, or 80.8 per cent of the issued capital. Li's net position has been reduced to 73.08 per cent as a result of the increase in both short and long positions over the past week.

"This is one of the most unusual activities I've seen since I started tracking the Hong Kong market in 1992," Halili said yesterday. "The timing of the chairman's trades is surprising given that he injected confidence into the stock by buying nearly 89 million shares worth HK$623 million in the open market from April 17 to May 18 and then suddenly increased his short position on May 18 by 796 million, which is nearly nine times the number of shares that he bought in the open market from April to May."

Halili said the status of Li's short position is not clearly stated in exchange filings. "The short is likely a pledge of shares as collateral for a loan to institutions. The lack of transparency has only led to more questions and uncertainty about the recent events."

Reuters reported on Wednesday that the Securities and Futures Commission had been investigating Hanergy for alleged market manipulation, citing a source. The SFC has declined to comment.

Kenny Tang Sing-hing, chief executive of Junyang Securities, said a rise in a short position "does not necessarily represent a bearish view because a number of situations" could have led to this. "It could have come from [over the counter] hedging arrangements, loan agreements and lending stocks, for example," he said. "Without knowing how Li's short position came about, it is hard to say what it means."

Hanergy's parent, Hanergy Holdings, on Thursday said it had not defaulted on any of its loans. It also denied reports that its pledged Hanergy shares had been sold by creditors, adding that there had no been reduction in the parent's holding.

At the time of going to press, Hanergy had not responded to requests for comment yesterday.