IPO’s 543pct surge halted by Hong Kong regulators on its debut

Hong Kong’s securities regulator suspended trading in a company’s stock after it rose 543 percent on its public market debut.

Shares of GME Group Holdings Ltd., a tunnel excavating subcontractor, were suspended from 1 p.m. local time yesterday by the Securities and Futures Commission. The shares were trading for the first time on the city’s exchange for small companies, called the Growth Enterprise Market.

“This is very surprising,” said Ricky Chim, who represents the financial services constituency in the city’s election committee, and was speaking about the suspension occurring on the first day of trading. “It has never happened according to my recollection.”

GME Group started trading at HKD0.54, and had risen to HKD3.47 by the time of the halt, according to data compiled by Bloomberg. More than 20 million shares changed hands in the morning session, the data show.

The halt comes a month after the regulator and GEM’s parent Hong Kong Exchanges & Clearing Ltd. warned listings applicants and their sponsors on the bourse to follow rules that ensure a fair market.

Half of the 10 best first-day gainers in 2015 saw their share prices plunge by more than 90 percent from their peak within a month, HKEX and the SFC said in a joint statement. Many GEM stocks have highly concentrated shareholdings and a small shareholder base, they said. Several GEM placements, including clothing firm My Heart Bodibra, pulled their listings after the statement.

Yesterday’s suspension was issued under a rule that lets the SFC call a halt when it believes that misleading, false or incomplete information has been included in documents and statements. The rule also allows the regulator to order suspensions to maintain an orderly and fair market, or in cases where it thinks the public interest would be served.

A spokesman for the SFC didn’t immediately respond to a request for comment. An HKEX spokesman said the company doesn’t comment on individual share suspensions. A person at GME who answered the phone but didn’t provide their name said the company is “still trying to figure out” the suspension.

Francis Lun, chief executive officer of GEO Securities Ltd., said it was the first time he knew of a stock being suspended on its first day.

“A question is how can the authorities list if they have questions,” he said. “They should stop it before it gets listed.” Benjamin Robertson, Crystal Tse, Bloomberg