Hanergy CEO Correctly Bets His Shares Would Fall

Li Hejun, CEO of Hanergy, apparently bet on his stock plunge. On May 18, he increased his short position by 796 million shares, which is equivalent to betting that his firm shares would tumble. This has resulted in a wipe out of his company with the share value dropping down by 47 percent.

Hanergy Thin Film Power Group, founded by Li, is one of the leading clear energy firms. It one time topped the bourses with the valuation of USD39 billion ($78 billion), which is much more than Sony Corp or Twitter Inc. Li is the richest man in China and is the biggest shareholder of his Hong Kong listed solar equipment manufacturer. According to CNN Money, the fall of 47 percent wiped out USD15 billion from his wallet in an hour. The plunge happened when the annual shareholder meeting was in progress. Li never attended this meeting and the company spokesperson said that he was opening the new clean energy exhibition centre. Hanergy has not commented on the loss and its shares remained suspended from trading.

Li increased his short position by 796 million shares five days before the plunge. The Financial Post reports that Li also bought 26.4 million additional shares at USD1.28 each on the same day. He had increased his short position by 7.7 percent of the issued shares even as the professional short sellers were closing out on their holding. These transactions, combined with the stock’s spectacular fall, have raised questions about Hanergy valuation and transparency. Usually, investors with short positions borrow shares to sell them in the hope of selling them on a profit when the price drops. Li’s short position was effectively betting on the fall of his company’s share value, which it did within the next 5 days. Hanergy lost over USD19 billion within an hour of trading.

Hanergy has not released any comment about the loss, and Li’s controversial move also has not been explained. Wall Street Journal reports that analysts had warned about overvaluation of Hanergy Inc. It is speculated that a link between Mainland China and Hong Kong was artificially propping up the stock. The sudden meltdown of the stock has raised questions once again about an imminent flash meltdown in Asia.

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