(Bloomberg) — Huabao International Holdings Ltd. sank a record 67% in Hong Kong trading after the flavoring and fragrances company disclosed that Chairwoman Chu Lam Yiu was being investigated for suspected disciplinary violations.
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The statement said a supervisory committee for Leiyang, a city in China’s Hunan province, is probing Chu, who’s also Huabao’s chief executive officer and controls 71% of the company.
It provided no details about the violations and added that business operations remain normal. A company representative said Huabao would inform the public should there be any progress in the investigation.
For investors, the fall is another stark reminder of what’s known as “key man risk” in China. In the past five years, at least five Chinese executives went missing, were unreachable or detained, sending shares of the companies tumbling.
Chu who was born in China’s Sichuan province and holds Hong Kong citizenship, was a member of the Fifth Chinese People’s Political Consultative Conference Committee in Shenzhen, a government advisory body, according to her biography on the company’s website.
She founded the predecessor of Huabao in 1996 and took the company public in 2006 through a reverse merger in Hong Kong. In 2018, it spun off a unit that began trading on the Shenzhen stock exchange.
In November, she was worth about $8 billion, but that’s tumbled to $2.6 billion after the latest plunge, according to the Bloomberg Billionaires Index.
(Updates to add company comment in second paragraph)
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