China's one-time richest man Li Hejun loses half his fortune

Billy Chan

Updated May 21, 2015 – 5.59am, first published at May 20, 2015 – 4.19pm

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Hanergy Thin Film Power, the solar equipment maker controlled by China's one-time richest person Li Hejun, suspended trading in Hong Kong after the stock plummeted 47 per cent in morning trading on Wednesday.

The stock fell to $HK3.91 before the suspension at 10:40 am, shaving $HK144.3 billion ($US18.6 billion) off its market value, on the day of its annual general meeting in Hong Kong. Chairman Li didn't attend the AGM, T.L. Chow, the company's external spokesman, said by phone.

Before Wednesday's decline, the stock had surged more than six-fold in the past year despite questions from analysts and investors about the company's revenue sources, leading Forbes magazine to name Li earlier this year as China's richest individual. About 61 per cent of Hanergy Thin Film's sales derive from Beijing-based parent Hanergy Holding Group, the listed company said in March.

Hanergy chairman Li Hejun has been outspoken in defending the company. Getty Images

"All directors of listed companies take part in setting the dates of their shareholder meetings, and they should attend," said David Webb, shareholder activist and founder of Webb-site.com. "If a chairman of a mainland company did not show up in Hong Kong for the AGM, then it raises questions."

The company's first statement Wednesday didn't give a reason for the suspension. A subsequent statement from Hanergy said the stock has been suspended pending "an announcement containing inside information."

Hanergy uses a niche technology in the photovoltaic industry, where more than three quarters of all panels are based on solar-grade silicon. Thin film cells are more flexible but less efficient than crystalline silicon-based panels.

Prior to Wednesday's plunge, Hanergy Thin Film's market value had at one point risen to more then $HK300 billion. That's larger than Japan's Sony Corporation and almost seven times the size of First Solar, the biggest US solar company.

The run-up in Hanergy's shares hasn't been without questions.

"It's an adjustment that the market has been waiting to happen, as Hanergy's earnings and business performance didn't support such a high stock price or valuation," said Gong Siwen, Shanghai-based analyst at Northeast Securities.

The Chinese solar company was the subject in January of an investigation by the Financial Times newspaper, which questioned its "unconventional" accounting practices.

A February 27 report from analysts Charles Yonts and Johnny Lau at CLSA Asia-Pacific Markets in Hong Kong raised more scepticism, saying the stock was wildly inflated.

The stock "is a disaster waiting to happen," Geo Securities Chief Executive Officer Francis Lun said by phone.

Bloomberg New Energy Finance released a report in March saying Hanergy is working with "unproven" technology and has disclosed few details about the work that underpins its valuation.

In a six-page examination of the Hong Kong manufacturer's operations, the London-based researcher said it's been unable to find a detailed list of solar-power projects that would help explain why the company's shares surged in the past year.

Hanergy Thin Film, which isn't included in Hong Kong's benchmark Hang Seng Index, is covered by only two analysts, according to data compiled by Bloomberg.

Outside solar, Hanergy has more than 6 gigawatts of hydropower projects and 131 megawatts of wind power, according to the company's website.

Li, Hanergy's chairman, owns more than half of Hanergy Thin Film. Li has been outspoken in defending the company, saying critics fail to understand his strategy and the potential of the thin-film market.

"Hanergy is very cautious in thin-film investment," Li said earlier this year during a brief interview in Beijing. "Outsiders said Hanergy's investment is a bet, but I am absolutely not gambling."

First Solar, based in Tempe, Arizona, and Japan's Solar Frontier are the other main companies working in thin film.

Bloomberg