Isaac Lawrence

The Securities and Futures Commission (SFC) announced on October 13 that it had taken action against two groups suspected of manipulating IPOs. The groups allegedly participated in fraudulent schemes intended to create a false or misleading appearance of demand for shares in three IPOs. The SFC issued restriction notices to several brokerages, prohibiting them from disposing of assets in client accounts linked to the two groups, up to an aggregate limit of about HK$4.664 billion. Chabaidao (2555.HK) was suspended from trading at 9am the same day.

Two groups and three IPOs

The first group involves Sun Ran, a licensed representative of Harvest International Investments, and eight related companies. The SFC issued restriction notices to six brokerages, covering up to HK$4.379 billion — the highest amount recorded in a case of this kind. The group is suspected of participating in fraudulent IPO schemes involving PharmAbcine (2592.HK) and Chabaidao. The second group involves Liu Haoran, The Reynold Lemkins Group (Asia) Limited and Kaufmann & Company Pan-Asia Limited. Notices were issued to 29 brokerages, covering about HK$285 million and relating to the IPO of ESWIN Computing (2479.HK).

The amounts are limits on asset disposals, not fines, and do not represent assets frozen at Chabaidao. The brokerages that received the notices are not subjects of the investigation. sohu sfc

The SFC said some IPO proceeds may have been transferred out of the listed companies under undisclosed agreements between the companies and the relevant groups for purported investment in financial products. The agreements may have secretly channelled the funds back to major placees or their connected parties. The parties involved could later be ordered to compensate affected investors through a restoration process. The SFC did not specify which listed company or companies were involved.

PharmAbcine: sharp contrast between public and international offerings

PharmAbcine listed on July 3, 2025, at an offer price of HK$10.10 per share. Its global offering comprised 60.582 million shares and raised about HK$612 million. The Hong Kong public offering was 78.78 times subscribed, with about 29,000 applications and a first-lot allotment rate of about 5%. The international offering was only 0.89 times subscribed and was not fully covered. The company subsequently reallocated 6.057 million shares from the international offering to the public offering, increasing the public-offer portion from 10% to 20% and leaving 80% for the international offering. Reports said the standard clawback mechanism was not triggered.

PharmAbcine opened below its offer price on its first trading day and closed at HK$6.20, down 38.61%. Its 52-week high was HK$9.58. Intraday on June 25, 2026, it fell nearly 20% to a record low of HK$0.90. On its last trading day before suspension, September 9, it closed at HK$1.19, about 88.2% below the offer price, giving it a market capitalisation of about HK$1.1 billion. Compared with its HK$9.58 high, the share price had fallen more than 87%. The SFC ordered a suspension on September 10 under Section 8(1) of the Securities and Futures (Stock Market Listing) Rules, citing serious concerns that the company's IPO may have been manipulated to create a false appearance of demand. Hong Kong media reports said the focus was on the flow of IPO proceeds rather than simply share-price speculation.

Chabaidao: undersubscribed public offer and concentrated placees

Chabaidao listed on April 23, 2024, at an offer price of HK$17.50 per share. Its global offering comprised about 147.8 million shares and raised about HK$2.586 billion. China International Capital Corporation acted as sole sponsor, and no cornerstone investors were introduced. The Hong Kong public offering received only 4,593 valid applications and was 0.50 times subscribed. A total of 7.4408 million shares were transferred to the international offering, reducing the public-offer portion from 10% to 4.96%. The international offering was 1.11 times subscribed. Of the 122 placees, the five largest received 52.11% in aggregate and the 10 largest received 86.75%; 100 placees received only one lot each, or 200 shares. The allotment results announcement warned that the H shares were highly concentrated and that a small amount of trading could lead to significant price volatility.

Chabaidao closed at HK$12.80 on its first trading day, down 26.86%. It closed at HK$4.035 on October 12, the last trading day before its suspension, giving it a market capitalisation of HK$5.96 billion, about 77% below its offer price. Hang Seng Indexes Company announced on October 14 that Chabaidao would be removed from the relevant Hang Seng Indexes after the close on October 22 at HK$0.0001, with effect from October 23. Chabaidao said in an announcement the same day that its board was seeking legal advice and would fully co-operate with the SFC, adding that business operations remained normal. The SFC has not said that Chabaidao or its management should be held responsible, while concentration among placees alone does not prove that any of the placees engaged in misconduct.

ESWIN Computing: note arrangements and auditor opinions

ESWIN Computing listed on June 28, 2024, at an offer price of HK$83.33 per share. It introduced four cornerstone investors, including Reynold Lemkins, which subscribed for about HK$320 million worth of shares in total. In an October 2024 announcement, the company disclosed that it had subscribed for cash-management notes issued by Reynold Lemkins, including one tranche worth US$6 million. It said the subscription was not an indirect benefit or side arrangement granted because of Reynold Lemkins' role as a cornerstone investor. Trading in the company's shares has been suspended since April 1, 2025, after it failed to publish its results. The company announced its 2024 and 2025 results on September 20, with the auditors issuing disclaimers of opinion for both years. For 2024, the reason was that sufficient appropriate audit evidence could not be obtained on the note subscription and chip prepayments. On August 23, the company entered into a deed with controlling shareholder Zuo Lei to sell the notes for US$10 million; reports said the transaction had been completed. Under Rule 6.01A of the Listing Rules, the 18-month period for continuous suspension expired on September 30, giving the Stock Exchange the right to cancel its listing. The SFC did not say whether these arrangements constituted the arrangements referred to in its case.

Three data warning signs

According to Choice data, of the 215 IPOs that came to the Hong Kong market between the beginning of 2025 and September 13, 2026, only 13, or 6.05%, had international offerings subscribed at less than one times. Some market participants regard a hot public offering alongside a weak international offering as a warning sign requiring further analysis. Separately, data compiled by Phoenix News showed that the 10 largest placees in Hong Kong IPOs typically account for 50% to 60% of allocations. Dongpeng Beverage accounted for 60.33% and LINGYI iTECH for 59.63%. An auditor's "disclaimer of opinion", also known as an inability to express an opinion, means the auditor was unable to obtain sufficient evidence to reach a conclusion on the financial statements. These are commonly used market indicators, not evidence of misconduct, and do not constitute accusations against any individual company or investment advice.

SFC chief executive Julia Leung said the regulator adopted a zero-tolerance stance towards any form of IPO manipulation, price manipulation or the creation of a false market. The SFC's investigation is continuing and it would not comment further.