Digital Domain Holdings Ltd (數字王國集團) yesterday became the latest Hong Kong stock to tumble after surging more than 500 percent in a matter of months, following declines in Hanergy Thin Film Power Group Ltd (漢能薄膜發電) and Goldin Financial Holdings Ltd (高銀金融).
The company, which owns a majority stake in the visual-effects producer for Hollywood movies, including Iron Man 3, sank as much as 61 percent in Hong Kong yesterday without an immediate explanation. The stock closed 41 percent lower amid record volume.
Digital Domain was unaware of any reason for the drop, according to a regulatory filing, while the company declined to immediately comment in response to questions.
The shares surged more than 1,500 percent this year through a May 19 peak, valuing the company at about US$3.5 billion, or more than Hong Kong builder Hopewell Holdings Ltd (合和實業). Yesterday’s plunge follows one-day declines of more than 40 percent in Hanergy and Goldin Financial last month.
Speculation in Hong Kong-listed companies has increased since the territory established an exchange link with Shanghai, said David Webb, the Hong Kong-based founder of Webb-site.com.
“These kinds of stocks have no fundamentals and only rumors are moving the prices,” said William Fung (馮國綸), vice president at Southwest Securities Co (西南證券) in Hong Kong. “In one day the dream can be gone.”
Digital Domain was nominated for an Oscar for its work on X-Men: Days of Future Past this year, but failed to win. The company had sales of HK$850 million (US$110 million) last year.
As well as the media entertainment business, Digital Domain also has a property investment arm and a unit that trades metal scraps, such as copper wire, between Hong Kong, China and other nations, according to its annual report.
Digital Domain’s previous incarnations under the 547 stock ticker in Hong Kong include Mansion Holdings Ltd (民信集團), a fire prevention and fire-fighting systems company, and Sun Innovation Holdings Ltd (奧亮集團), which scrapped a plan to buy mining assets in 2012.
Digital Domain Media Group Inc, the special effects company cofounded by Titanic director James Cameron, went public in the US in November 2011, pricing shares at US$8.50 each, before filing for bankruptcy less than a year later. A partnership of Chinese and Indian film companies bought the business and then sold it to Hong Kong-listed Sun Innovation in March 2013. Sun Innovation renamed itself Digital Domain Holdings in December of that year.
Hanergy’s Hong Kong shares tumbled 47 percent on May 20 before trading was suspended, erasing about US$19 billion of market value and ending a more than six-fold surge over the previous 12 months. Hong Kong’s regulator confirmed on Thursday last week that it was investigating the solar company.
A day after Hanergy’s plunge, Goldin Financial Holdings Ltd and Goldin Properties Holdings Ltd (高銀地產), controlled by billionaire Pan Sutong (潘蘇通), slumped more than 40 percent. Before the rout, the two stocks had soared more than 300 percent this year for the biggest gains on the Hang Seng Composite Index.
Virtually no analysts tracked by Bloomberg covered any of the four companies.
“The level of speculative activity in the market varies over time and at the moment it is very high,” said Webb, a shareholder activist.
“It is partly because of the expected arrival of mainland capital from the through train,” he added.
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