New Gonow’s soaring stock and tanking profit: Shareholder concentration at play?

The recreational vehicle maker’s stock plunged after the securities regulator issued a high shareholder concentration warning, reversing a massive run-up over the last six months

Key Takeaways:

• Over 90% of New Gonow’s shares are concentrated in the hands of its chairman and 22 other shareholders and related parties
• The recreational vehicle maker’s revenue rose 14.9% in the first half of the year, but its profit plunged 78.5%

By Lee Shih Ta

It’s quite old school, making recreational vehicles (RVs) that lack the allure of AI and robots. What’s more, its profits are tanking. Despite all that, shares of New Gonow Recreational Vehicles Inc. (0805.HK) skyrocketed by a factor of 10 over a six-month period between April and October this year.

The company sells most of its RVs in Australia and New Zealand, but is trying to charge up its growth by expanding into other global markets. But before those efforts could bear fruit, a regulatory warning last week on its high shareholding concentration thrust the company into an unwanted public spotlight.

Between April 30 and Oct. 23, New Gonow’s stock surged from just HK$1.40 to HK$14, and rose further to HK$15.09 on Oct. 26. The company’s midyear report released in the midst of that mega-rally revealed its revenue grew by 14.9% in the first half of this year, but that its profit plummeted 78.5% to just 6.61 million yuan ($992,300).

The stock run-up prompted an investigation by the Hong Kong Securities & Futures Commission, which announced its findings on Oct. 26. It noted that as of Oct. 13, the company’s Chairman and CEO Miao Xuezhong held 48.69% of the company’s shares. Meanwhile, 22 other shareholders and related parties collectively held another 41.69%. Together, that group accounted for 90.38% of New Gonow’s total issued shares, leaving other investors with just 9.62%. The warning spooked investors, sending the stock plummeting 33.4% to close at HK$10.05 the next day.

We should point out that even after the steep drop, New Gonow’s price-to-earnings (P/E) ratio still stands at an exorbitant 1,000 times. Although shrinking profits have amplified the multiple, it also underscores that the company desperately needs stronger profitability to come even close to justifying its current valuation.

Amplified risk

New Gonow is the 17th company to be flagged this year for highly concentrated shareholding as of Oct. 26, according to the Securities & Futures Commission, which issues such warnings as part of its ongoing market oversight. When shares are tightly held among a small number of holders, the impact of trading on the stock price can be magnified.

If the limited pool of shareholders rarely sell, the number of shares available for trading in the open market may be extremely limited, meaning even a tiny volume of buy orders can quickly drive up the price. Conversely, a lack of interest from buyers can exacerbate price drops. While such a holding structure inevitably increases price volatility and associated risk for traders, it is not enough on its own to explain the huge surge this year.

At the request of the stock exchange, the company subsequently issued an announcement confirming that its public float was no less than 25% of its share capital, in compliance with listing rules. That doesn’t contradict the regulator’s finding of high shareholding concentration, since some shareholders from the concentrated group may still qualify as “public shareholders,” allowing their stock to be counted toward the public float. In short, this means that meeting the stock exchange’s 25% minimum requirement doesn’t necessarily mean the shares are widely available for trading among ordinary investors.

The reality is that New Gonow’s concentrated shareholding dates back to the time of its listing. Allotment results from the January 2025 IPO showed controlling shareholders held 74.38% of the company, and the top 10 shareholders collectively owned 93.33%.

While controlling shareholders have reduced their stakes several times since then — including an off-market transfer of 16.15% of the company’s share capital to independent third party Kan Chisan in May this year — large block transfers do not inherently lead to a widespread dispersion of share ownership. A reduction in holdings by controlling shareholders does not necessarily guarantee a proportional increase in shares available for trading in the open market.

Earnings dragged down

Concentrated shareholding may magnify stock volatility, but whether New Gonow’s valuation is justified following the recent stock run-up still depends on its underlying business fundamentals. In fact, the company’s business began to come under pressure as early as last year. Its revenue edged up by only about 0.8% in 2025, while its profit dropped 28.9% to 30.82 million yuan. While it returned to stronger revenue growth in the first half of this year, the profit declines have yet to bottom out.

New Gonow capitalizes on its China manufacturing base and supply chain to make its RVs at home, then conducts final assembly, customization, and quality control in Australia before selling through local showrooms and dealerships. The company is currently trying to expand its product line from towable RVs, which require other vehicles for hauling, to motorhomes that can be driven independently. It is also looking to expand beyond Australia and New Zealand to markets in Europe and Canada.

Sales data indicate demand is improving for its products. RV deliveries in the first half of the year rose by 10.3% to 1,508 units, and orders on hand at the end of June reached 1,852 units, with a contract value of approximately 552 million yuan. The rise in sales drove a 14% increase in the company’s gross profit during the six-month period, while its gross margin dipped slightly from 29.5% to 29.3%. But the gross profit gains were more than offset by mounting expenses and a deterioration in other income and expenses.

Expansion of its self-operated showroom network led to a 26.5% jump in selling and distribution expenses, which reached 66.75 million yuan and outpaced revenue growth. Over the same period, the company also recorded a fund investment loss of 10.7 million yuan, and its foreign exchange gains shrank by about 10.92 million yuan, causing its other income and expenses to swing from a 17.59 million yuan gain to a 3.93 million yuan loss in the latest six-month period.

Expansion into motorhomes as well as the European and Canadian markets offers New Gonow an opportunity to broaden its customer and product bases. But that also requires big investment in things like product certification, and developing sales and after-sales service channels. The company’s current sales growth isn’t enough to show that profits are about to rebound sharply anytime soon. The company must still validate its lofty valuation through concrete deliveries, cost control and overall profitability.

A high shareholding concentration warning is neither an outright finding of regulatory violation nor an automatic trigger for trading suspension. Yet, when shares are concentrated among a handful of holders, investors naturally pay closer attention to whether the stock price reflects a company’s true worth, and whether shares can be easily sold when someone wants to exit an investment. Even if the company technically complies with public float rules, these lingering concerns could still deter investors.

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