An individual investor is the first of what could be many to file a lawsuit against senior management of a listed construction company for issuing misleading statements.
The investor, surnamed Yin, has accused management at Hangxiao Steel, a Shanghai-listed construction company whose share prices has jumped almost 8 times this year, of violating information disclosure rules. Yin has demanded compensation for the 15,244.88 yuan she lost.
Misleading statements made by four indicted senior managers caused her to misjudge the company's performance and value, Yin said in her litigation.
The accused senior managers include the chairman, a board member, general manager and security representative.
Hangzhou Intermediary has accepted the case, according to reports at Oriental Morning Post. But a Hangxiao spokesperson said the company has not received any court notice.
The previously little-known Hangxiao has shot to stock market fame recently after its shares leaped 8 times this year.
China Securities Regulatory Commission fined Hangxiao 400,000 yuan, and fined its Chairman Shan Yinmu and President Zhou Jinfa 200,000 yuan each, and three other officials 100,000 each, for failing to disclose information timely.
Hangxiao is the first case involving illegal information disclosure since the listed company information release management rule took effect on January 30.
Hangxiao Steel's shares surged by the daily limit of 10 percent for 10 straight days ending on March 16.
The company announced on March 13 that it had signed a construction contract in Angola worth 34.4 billion yuan.
Trading of company shares was halted for 10 days beginning on March 19, after Hangxiao was accused of manipulating stock prices by announcing it had grabbed an enormous contract in Africa.
"The company failed to disclose orders from Angola in newspapers or tell investors about the transaction in due time," Hangxiao Steel said in a statement on May 14.
"Comments made by company officials relating to the probe were misleading," the company said in a statement to the Shanghai Stock Exchange at the time.
Yin's suit against senior management is likely to be followed by a wave of other suits from angry investors.
According to a local newspaper report, more than 200 individual investors across the country who lost their money investing in Hangxiao's stock have expressed the intention to sue.
Hangxiao shares closed at 27.83 yuan yesterday, down 6.77 percent.
(China Daily May 29, 2007)