In another setback to Tianhe Chemicals Group, the Securities and Futures Commission (SFC) has directed The Stock Exchange of Hong Kong to suspend all trading of the Chinese additive maker’s shares effective 25 May 2017. The SFC can issue so-called Rule 8 directions under Hong Kong’s listing rules “on grounds that the market is misinformed, disorderly or unfair.”

Tianhe Chemicals said it “is seeking further legal advice as to its rights, as well as how to address and resolve the Commission’s concerns going forward and resume trading of the shares.”

The company had voluntarily requested suspension of trading in the company’s shares on 26 March 2015, as a result of the delay in the publication of its 2014 annual results, following the resignation of its auditor at that time, Deloitte Touche Tohmatsu, on 16 September 2015. Its shares had remained suspended since then.

Tianhe Chemicals became the target of massive short selling soon after the company’s shares were listed in The Stock Exchange of Hong Kong, following a report by a group called “Anonymous Analytics” which alleged that the company generates only a fraction of the revenue it claims. The company had raised USD 654 million in an initial public offering (IPO) in June 2014. Morgan Stanley’s Private Equity Asia III fund had invested USD300 million in the company before the IPO.

Based on unaudited results, Tianhe Chemicals Group recorded a net profit of approximately RMB901.0 million (USD130.74 million) for the year ended 31 December 2016, representing a 55% decline from the previous year. The company attributed the decline to its specialty fluorochemicals unit, which was ordered to relocate its production site to comply with the local government’s unified planning.

“That resulted in significant negative impact to the production, sales and performance of this segment,” the company said.

The company said it “hopes to conclude the relocation plan in the second quarter of 2017. On this basis, the production and sales of specialty fluorochemical products will then be gradually ramped up in 2018. The adverse impact of the relocation to the specialty fluorochemicals segment will likely extend to the full year of 2017.”

“Nevertheless, our lubricant additives segment continued the momentum of steady growth. The revenue and gross profit of this segment recorded an increase over 6% and 24% respectively for the year ended 31 December 2016 as compared with 2015. This was mainly contributed by the continued growth in the export sales of our lubricant additive products to multinational customers.”

The company also released the key findings of independent forensic investigator Grant Thornton in October 2016, which indicated that it “did not find any evidence showing that the management of the group was involved in any fraudulent accounting or irregularities.”