Chinese executive’s arrest for murder weighs on share of Sunflower Pharmaceutical

A large pharmaceutical company in northeast China’s Heilongjiang province scrambled to do damage control after news its former chairman and controlling shareholder had been arrested on murder changes sent its share price into a tailspin.

Sunflower Pharmaceutical Group issued a response to an inquiry by the Shenzhen Stock Exchange saying operations are not affected by the arrest. Its stock plummeted 10 per cent – that daily limit in China – in just 12 minutes on Wednesday. The company’s shares were trading down for nearly all of Thursday, closing at a loss of 1.4 per cent.

The story caught fire on China’s exuberant internet community, prodded by a report citing unnamed sources Wednesday in state-run ThePaper.cn’s report that Guan Yanbin, who left his post last year, was arrested for allegedly killing his wife. Beijing News also reported Guan was accused of killing his wife, citing a source in the local prosecutor’s office with saying she had been beaten into a “vegetable.”

A police microblog on Wednesday confirmed the arrest on murder charges, without details on the victim.

In its response to the exchange, Sunflower said the case was still under investigation and only concerned Guan’s families, and company management as well as business operations were in order and stable. The statement also said that Sunflower’s 2018 annual report that was released in March had a section highlighting that Guan was taken into judicial control because of causing a bodily injury to someone in a personal spat.

The stock has risen 21 per cent this year, trailing a 37 per cent gain on the Shenzhen Composite Index.

The company, which makes medicines treating illnesses from children coughing to cardiovascular disease, is valued at 10.4 billion yuan (US$1.55 billion) and is among the top 30 listed pharmaceuticals on the mainland’s exchanges, according to Bloomberg data.

Guan, 64, remains the actual controller of Sunflower by directly holding an 11.4 per cent stake and stakes in two affiliates that have interest in the listed company. He resigned as chairman and general manager in December after a 20-year stint.

Guan, who divorced his wife in 2017, was on bail after signing a memorandum of understanding with his son in January, Beijing News said.

He, together with other 40 people, bought out a struggling state-owned pharmaceutical for 15 million yuan in 1998 before bailing it out and renaming it as Sunflower Pharmaceutical, according to ThePaper.cn.

Sunflower’s first-quarter earnings may have risen by as much as 15 per cent from a year earlier due to increased sales, the company said in a separate statement on Wednesday.