Hanergy Holding Group chairman Li Hejun is facing investigation by Hong Kong regulators for stock implosion after the subsidiary shares fell by 47 percent on May 20, which resulted in the loss of $18.6 billion and later, the suspension of its stock trading.
According to the report by Wall Street Journal, Hanergy's rise and fall show the poor disclosure practices of some businesses in China as well as the volatile nature of stocks.
The report said that the solar panels introduced by Li's company were not efficient enough to compete in the market, although its solar technology--called "thin film"--promised potential new uses due to its lightness and flexibility.
But the thin film was less efficient than the common panels made of crystalline silicon, the report added.
According to regulatory filings viewed by The Wall Street Journal, Hanergy began applying for bank loans to fund its expansion plans starting in 2013, as Li turned to personal loans from trust companies to raise funds.
In the past two years, he borrowed money against his own shares in the Thin Film subsidiary and used it to buy more shares. He continued to buy until the time the shares crashed.
The report said that Hanergy, a closely held company, did not disclose results, but its listed subsidiary reported its revenue and profits.
Two years ago, Hanergy Thin Film Power Group Ltd. was a company with multibillion-dollar valuation and a Hong Kong stock-exchange star. In April, its market capitalization exceeded $40 billion, higher than Sony Corp., which made 47-year-old Li as China's richest man.
Li had even declared tie-ups with Tesla Motors Inc. IKEA Group, and Aston Martin Lagonda Ltd. as part of his vision to bring solar power to the masses. He announced solar energy projects around the world, from Ghana to Japan to the U.S.
But on May 20, the subsidiary's shares plunged 47 percent, worth nearly $18.6 billion, and Li lost almost half of his fortune, then trading of its stocks was halted.
Following that, Hong Kong securities regulators started investigating the subsidiary as trading in its shares remains suspended.