Investors holding Gaodi shares (01676) have not seen the 2024 fiscal year annual report planned to be disclosed on September 30, but were instead hit by a sudden "flash crash" unexpectedly.

On September 23, Gaodi shares experienced a sharp drop in the morning session, with the stock price falling by more than 78% at one point. By the close, the stock closed at 0.54 Hong Kong dollars, a decline of 67.86%. At the same time as the sharp drop in the stock price, Gaodi shares saw a sharp increase in trading volume, with a total turnover of 33.727 million Hong Kong dollars for the day, corresponding to a turnover ratio of 40.45%.

Interestingly, Gaodi shares are set to disclose the 2024 fiscal year annual report in five trading days. On the eve of the annual report "report card" being unveiled, Gaodi shares fell sharply first, perhaps because the trading team behind it sensed danger early and followed the strategy of "of the thirty-six stratagems, fleeing is best", or perhaps some funds decided to escape at all costs due to other unknown reasons?

In light of the series of actions taken by the company in recent months, Gaodi shares' flash crash today may not be simple.

Firstly, at the end of last year and in August of this year, the company completed two rounds of refinancing successively. In the first round, Gaodi shares successfully placed 24 million new shares at a subscription price of HK$1.8 per share. Less than a year later, it issued 10.01 million new shares at a subscription price of HK$1.4 per share, raising a total of over HK$57 million through the two placements. Gaodi shares' frequent refinancing may be related to its consecutive annual losses and funding shortages. According to the company's financial report, as of December 31, 2023, Gaodi shares had cash and cash equivalents of only 41.982 million yuan.

In addition, the share capital structure in the two completion announcements of Gaodi shares is also very different. After the recent completion of the second placement, the largest shareholder of the company is Foton Holdings Limited, holding 27.48 million shares, accounting for approximately 17.84%, while the holdings of other public shareholders reached 75.66%.

(Gaodi shares announcement screenshot on August 14, 2024)

It is worth mentioning that in October last year, Gaodi shares (at that time the company's share abbreviation was 'Shanghai Shenghai Group') announced their intention to rename to 'Futian Co., Ltd.', and the English name is planned to be changed to 'Foton Holdings Limited', which is the current name of the company's largest shareholder. However, shortly after, Gaodi shares issued a clarification announcement that the company will change its name to 'Gaodi Co., Ltd.'.

Comparing with the announcement 8 months ago, at that time the largest shareholder of Gaodi shares still held 52.5 million shares, held by Ruiqi Co., Ltd., and the total holding of other public shareholders was less than 40%.

(Gaodi shares announcement screenshot on December 8, 2023)

In addition to significant changes in the shareholder structure, there have also been changes in the senior management of Gaodi shares in the past few months. On July 29, Gaodi shares announced that Hu Hongchu resigned as Chairman of the Board of Directors and Executive Director of the company, and the successor is Li Tingfeng, the company's Chief Executive Officer, who was 33 years old at the time.

After the disclosure of the personnel changes announcement mentioned above, Gaodi shares rose sharply for two consecutive trading days, reaching 1.8 Hong Kong dollars in mid-day of August 1, setting a new high for the stock price stage. However, in less than two months, Gaodi shares have evaporated by 70%.

Year after year, the shadow of losses looms.

Gaodi shares can be considered an old face in the Hong Kong stock market. The company landed on the Hong Kong Stock Exchange as early as 2017. However, as mentioned in the paragraph above, until this year, the company's stock abbreviation was always 'China Shenghai Group'. On January 15th this year, the company's Chinese name was officially changed from 'China Shenghai Group Limited' to 'Gaodi Co., Ltd.', and two months later, the company's stock abbreviation was finally changed to 'Gaodi Shares'.

Compared to the company's current name, the two characters 'Shenghai' in Gaodi shares' original name may be more helpful for investors to understand the company's business. According to the official website, Gaodi shares are headquartered in Xiamen, mainly selling dried seafood, algae, mushrooms, seafood snacks, and frozen seafood products under the 'Wofeng' brand. However, starting from 2020, possibly to explore new business or balance business risks, Gaodi shares have also ventured into daily necessities and cosmetics business.

From the most recent financial report of Gaodi shares, the company's performance did not have many highlights. In the first half of the 2024 fiscal year (July-December 2023), Gaodi shares achieved a revenue of 0.196 billion yuan (RMB, the same below), all from the food business. During the same period, the company's fast-moving consumer goods and other business did not generate any revenue; in contrast, the revenue from the same period last year for this business was 0.581 million yuan, accounting for only 0.5% of the revenue.

Although the company's total revenue increased by 60% year-on-year due to the rise in food sales, profitability has always been a major issue for Gaodi shares. During the reporting period, Gaodi shares had a gross profit of 6.59 million yuan, with a gross margin of only 3.4%, a slight increase of 0.8 percentage points year-on-year. During the same period, the company's net income was -40.312 million yuan, narrowing the loss compared to the same period of the previous year, which was -4463.1, but the possibility of turning losses around still seems distant.

Shareholders and management changes add more uncertainty.

Due to poor management, Gao Di Holdings, which has an insufficient family background, is facing significant financial pressure. In order to ensure that it has enough financial resources to deal with the increasingly complex business environment, Gao Di Holdings conducted refinancing activities in November 2023 and July of this year.

Although in terms of results, Gao Di Holdings' two share placements were both successful and raised a total of over 57 million Hong Kong dollars, given the significant fluctuations in the company's stock price today, the company's issues may not be limited to the financial aspect.

Looking back in time, Gao Di Holdings may have encountered a major operational crisis as early as 2022. In September of that year, Gao Di Holdings, whose security code was still Shenghai Group, announced that Liling Li and Mademin Ma of Rosenvin Business Consultants had been appointed as the liquidators of the controlling shareholder Ruqi Limited, which was originally fully owned by Liu Rongru, executive director and co-chairman of Shenghai Group.

According to the announcement at that time, the reason why the controlling shareholder Ruqi Limited of Shenghai Group was taken over was mainly because Liu Rongru failed to fulfill his repayment obligations under several loan arrangements with Ultima Prime. As a mortgagee, based on the share mortgage agreement between Liu Rongru as the mortgagor and Ultima Prime, liquidators were appointed.

It is worth mentioning that the former chairman of the board of Gao Di Holdings, Hu Hongchu, took office in April 2023 for just over a year. It was also in August of that year when Liu Rongru ceased to be the company's CEO and director, and appointed Li Tingfeng to succeed him in this position.

According to the Tianyancha App, Ruqi Limited has been dissolved so far, and "Foton Holdings Limited" found by searching for "Foton Holdings Limited" has been established for 1 year. As mentioned at the beginning of the article, as of August 14, Foton Holdings Limited is the largest shareholder of Gao Di Holdings, holding 17.84%. From this, it can be inferred that the current equity of Gao Di Holdings may already be quite diversified.

Dazhi Finance APP also found through the Hong Kong Stock Exchange's Central Clearing System that there are a relatively large number of brokers holding Gao Di shares with relatively scattered holdings. The shareholding ratios of the top brokers Kaiji Securities Asia Limited, Zhongtai International Securities, and Zhongtian Securities are 8.62%, 6.47%, and 6.31% respectively.

In addition, in April and August of this year, Gao Di shares also had frequent changes in warehouse and storage behavior, which may also be a precursor to major shareholders divesting. Taking the two transactions in August as an example, on August 9, Gao Di shares experienced a change in warehouse transference, with Zhongtai International Securities as the outgoing broker and Hong Kong Shanghai HSBC as the incoming broker, with a transfer ratio of 3.86%; 7 days later, the stock experienced a change in warehouse storage, with a storage ratio of 6.95, and Zhongtai International Securities as the incoming broker.

Considering various information, the current situation of Gao Di shares seems to be on shaky ground, with uncertainty still accumulating. Apart from changes in the number of shares held by the management and major shareholders, Gao Di shares' operational strategy also appears to have deviated from previous plans. According to the interim report disclosed by Gao Di shares earlier, the company will actively engage in new business, with a focus on internet-related businesses that are less related to its traditional business, possibly indicating that the company will completely abandon its previously highly anticipated fast-moving consumer goods business.