(Yicai Global) March 9 -- Shares in Shede Spirits sank sharply in morning trading today, sparking market concerns that the Chinese liquor maker's controlling shareholder Fosun International might be reducing its stake. Such rumors are untrue, Yicai Global learned from a person familiar with the matter.

Shede Spirits’ share price [SHA:600702] closed down 4.3 percent at CNY188.50 (USD27.05) today. But around 11 a.m. China time, the stock suddenly dived by the exchange-imposed 10 percent, before recovering.

Fosun is not paring its stake in Shede Spirits, the person said. Even during hard-times, the health-to-smart manufacturing conglomerate did not reduce its shareholding in the Suining, southwestern Sichuan province-based distiller.

Fosun snapped up a 70 percent stake in Shede Group, the parent firm of Shede Spirits, for CNY4.5 billion (USD645.9 million) in December 2020 through its retail unit Yuyuan Tourist Mart. Shede Group’s assets were put up for sale by the Suining government after the previous owner was found to have stripped the company of its cash assets, leaving it heavily in debt.

Since the takeover, Shede Spirits’ performance has improved tremendously. Net profit surged 24 percent in the first three quarters last year from a year earlier to CNY1.2 billion (USD172.2 million) and revenue soared 28 percent to CNY4.6 billion, according to its latest earnings report.

Fosun, though, has been actively raising money through the sale of assets to clear its debts. Last September, it slashed its shareholding in Jinhui Liquor, another distiller, by 66 million shares, diluting its stake to 25 percent from 38 percent.

Editors: Dou Shicong, Kim Taylor