China’s largest lithium salt producer Ganfeng Lithium [002460:CH] is under investigation by China Securities Regulatory Commission (CSRC) for suspected insider trading, as reported by South China Morning Post on July 4. Ganfeng Lithium Chairman Li Liangbin admitted that the company was under scrutiny mostly because it acquired shares of Jiangxi Special Electric Motor (JSEM) [002176:CH] in June 2020 when the two companies were negotiating a merger. According to Ganfeng’s statement, the CSRC filed a case against the company on January 4, while the company was not informed of the case until July 1. Ganfeng vowed to actively cooperate with the investigation and assured the public that the probe will not affect its daily operations.
JSEM’s stock price hit its highest point of RMB32.6 (USD4.86) per share in August 2021, surging by almost 1940% from RMB1.6 (USD0.24) per share in May 2020. JSEM’s ballooning stock price can be partially attributed to its constant media speculation of a collaboration with Ganfeng. In June 2020, Ganfeng unveiled a plan to become JSEM’s largest shareholder by subscribing to JSEM’s private placement, but the plan was aborted in August 2020. Similarly, the two companies announced collaborations on production lines in August 2020. Two months later, they again terminated the partnership. The probe marks CSRC’s closer scrutiny of listed companies’ misbehaviors. In 2021, the CSRC conducted 201 investigations into suspicious insider trading cases, rising 25% YoY.