Visual effects firm Digital Domain sees share price plunge amid 'speculative activity'
Digital Domain Holdings, which operates the world's biggest independent visual-effects company, saw its share price plunge by 41.40 per cent at the end of trading on Wednesday on the back of increased speculation about its business.
About 1.87 billion shares in the Hong Kong-listed company were the subject of trading, up from the three-month average volume of 96.91 million shares. The stock closed at HK$1.26, after reaching a high of HK$1.97 in early trading and a low of 84 Hong Kong cents mid-afternoon.
"We are not aware of any reasons for these price and volume movements, or of any information which must be announced to avoid a false market in the company's shares or of any inside information that needs to be disclosed under ... the Securities and Futures Ordinance," Daniel Seah Ang, the chairman and chief executive at Digital Domain, said in a regulatory filing on Wednesday.
Digital Domain's share price closed at a record-high of HK$2.75 on May 19, days after Seah announced that the company's senior executives forged a deal to buy 25 per cent of the firm for HK$3.97 billion (US$511.85 million) in one of the biggest management buyouts in Hong Kong. The company's senior management agreed to purchase the 2.46 billion shares owned by Zhou Jian, the former chairman and largest shareholder.
That acquisition is expected to help drive Digital Domain's expansion into the virtual-reality content business and transformation into a full-fledged technology company.
Dennis Chien, a research analyst at China Investment Securities, declined to comment on Digital Domain's unusual share price and trading volume movement on Wednesday, but pointed out that speculation was rife in the stock market.
Shareholder activist David Webb said in a Bloomberg report that "speculative activity in the market varies over time and at the moment it's very high". He added: "It's partly because of the expected arrival of mainland capital from the through train."
The Shanghai Stock Connect programme, the through train for mutual stock market access by investors in the two cities, is thought to have the potential of raising the overall valuation of the Hong Kong market.
Digital Domain posted revenues of HK$850 million last year. It was nominated for "Best Visual Effects" in the 87th Academy Awards this year for its work on X-Men: Days of Future Past.
Previously known as Sun Innovation Holdings, Digital Domain continues to run a scrap metal trading business as well as various commercial properties and car parks in Hong Kong even after its successful expansion into the visual-effects industry.
In July 2013, Sun bought 70 per cent of Los Angeles-based Digital Domain 3.0 for HK$392 million and later adopted that name as a Hong Kong-listed company in December that same year. Reliance MediaWorks, part of Indian conglomerate Reliance Group, controls about 30 per cent of the visual-effects house that was co-founded by famed film director James Cameron in 1993.