FAST NEWS: Changjiu receives high shareholding concentration reminder

The Latest: Vehicle monitoring services provider Changjiu Holdings Ltd. (6959.HK) reported on Wednesday that it received a reminder from the Hong Kong Securities and Futures Commission (SFC) that its shareholding is highly concentrated. The company was informed that nine shareholders are holding a total of 24.11% of the total issued shares, together with the company’s chairman and the CEO’s family, which holds 74.2% of the shares. That means only 1.69% of the company’s shares are held by other public shareholders.

Looking Up: In listed companies with concentrated shareholdings, a large shareholding by a majority shareholder implies a high degree of correlation between the company’s interests and those of his or her personal interests, and therefore a greater incentive for the majority shareholder to be actively involved in the company’s affairs.

Take Note: If the shareholding of a listed company is highly concentrated in a small number of shareholders, even a small number of shares traded may cause the share price to fluctuate significantly. The warning to investors was the focus of the company’s statement, issued through the Hong Kong stock exchange.

Digging Deeper: Many Chinese consumers buy their cars on credit, with lenders treating the cars as collateral. Accordingly, such lenders look to companies like Changjiu, which monitor such vehicles against theft and damage. Changjiu has become China’s largest provider of such pledged vehicle monitoring services since its founding in 2019. After the second attempt to apply for listing on the Hong Kong Stock Exchange, it passed the listing hearing last December and went public in January this year.

Market Reaction: Changjiu’s shares plunged on Thursday and closed down 65.5% at HK$36.2 by the midday break, but the stock still trades at nearly 6 times its IPO price of HK$5.95.

Translation by A. Au

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