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Tuesday, Sep 29, 2020

Arrest of tycoon Jimmy Lai sparks surge in his company’s shares

Shares of the company that owns Apple Daily newspaper skyrocketed by as much as 344 per cent in afternoon trade, rebounding from a record low in the morning. Some analysts pointed to speculation that the company could sell its listed entity as a ‘shell’ for other firms to acquire in order to achieve a back-door listing
Shares of Next Digital, the parent company of Hong Kong newspaper Apple Daily, skyrocketed in frenzied trading on Monday, after police arrested its founder Jimmy Lai Chee-ying under the new national security law.

Next Digital, formerly known as Next Media, soared by as much as 344 per cent in the afternoon, before paring some of the gains to 183 per cent to close at HK$0.255.

It marks a dramatic turnaround for the stock in a roller-coaster day of trading. It had fallen 17 per cent in the morning session to a record low of HK$0.075, after news about the arrest first broke.

Turnover in the company’s shares shot up to HK$393 million, from a level of no more than HK$1.5 million recorded during the past two months.

This afternoon’s mysterious surge came on the heels of the arrest of media mogul Lai, as well as his son and a senior executive, for “collusion with a foreign country, uttering seditious words and conspiracy to defraud,” the Post reported earlier.

He is the most high-profile person to be detained after the national security law imposed by Beijing on the city came into effect in late June.

Traders and analysts were left scratching their heads over the reasons behind the sudden surge in the stock price. Some pointed to speculation that the company could sell its listed entity as a “shell” for other firms to acquire in order to achieve a back-door listing, a common practice among small-cap companies listed in Hong Kong facing dimming prospects.

“There has always been speculation that the company would sell itself as a shell company,” said Alan Li, portfolio manager at asset management firm Atta Capital in Hong Kong.

Others pointed to discussions on Facebook and the Reddit-like online forum LIHKG, which became a leading platform for protesters to organise demonstrations last year, that called on people to buy the stock to show their support for democracy and the anti-government movement.

A finance blogger named Muddy Water Finance, for example, bought 1.22 million shares in Next Digital at a price of HK$0.078 apiece to express his support for the publication, according to a post on his official Facebook page that contains screen captures of his trades. The post has garnered over 4,700 likes so far.

The blogger, who has written columns for Apple Daily for six years, sold the shares consequently to pocket a profit of about HK$75,000, he said in a later post.
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