(Yicai Global) Nov. 12 -- Dalian Zoneco Group's scallops cultivated from 2017 to last year have recently died in large numbers, which constitutes a significant risk of inventory drop, the firm said in a statement yesterday announcing the third mysterious mass scallop die-off the Northeast China seafood producer has declared to date.

Zoneco shares [SHE:002069] hit the limit down at opening today, falling 10 percent to stop trading at CNY2.70 (USD0.40).

The Liaoning province-based seafood firm's first two scallop wipe-outs also precipitated a steep drop in its stock price.

The China Securities Regulatory Commission fined the company CNY600,000 (USD86,000) and its Chairman Wu Hougang CNY300,000 and banned him from securities markets for life after a CSRC investigation in July found Zoneco's statements contained reporting misrepresentations and information disclosure violations.

This was the severest penalty the agency has ever handed down against a listed firm and its personnel. Another 23 executive or employees implicated were each fined between CNY30,000 and CNY30,000 and the firm's executive vice president, board secretary and chief financial officer were banned from the stock market for between five and 10 years.

Absconding Shrimp

The first mysterious scallop die-off, which resulted in the ouster of Feng Yuming, its chief executive, has drawn market attention to Zoneco ever since. Shrimps have also escaped from or died en masse in the company's custody.

The firm's second-largest shareholder Hedao No.1 Securities Investment Fund sold almost two million shares in the company between Nov. 13 and Dec. 19 last year, before Zoneco issued its loss warning, which also raised eyebrows among investors.

The company discovered this latest round of mass die-off recently after it began testing samples of farmed stocks on Nov. 7, it said in its statement. Over four-fifths of the bivalves perished in some areas. The 584,000 mu (about 389,333 hectares) of affected seabed represented an about CNY300 million (USD42.8 million) book value by the end of last month and the firm thus faces the risk of inventory impairment.

Judging from the dead mollusks' shell size and conditions, their time of death time was close to the time of sampling the statement added, but the cause is still unknown.

Zoneco blamed rainfall in February last year that was one-third less than average in 2017 that starved seawater in breeding grounds of nutrients and abnormally high water temperatures and excessive farm expansion for the last such event, however.

Formed in 1958, and formerly named Zhangzidao Fishery Group, the firm is China's largest seafood company by capitalization and recently rebranded itself for its internationalization strategy. Its main products are Yesso scallops -- named from an area north of Japan -- sea cucumbers, abalones, conches and sea urchins.

Timeline of the Zoneco saga:

The company announced the first anomaly with its scallop stocks in October 2014 and was forced to write these off to the tune of almost CNY800 million (USD115 million).

Zoneco again announced an irregularity in January last year, this time scrapping CNY630 million in stocks. It cites a shortage of food that starved the fan-shelled bivalves to death as the cause. The firm announces that this scallop apocalypse caused it net profit losses of CNY43.14 million in its first-quarter report.

In July, Wu Hougang, chairman of Zhangzidao, was fined CNY600,000 by the China Securities Regulatory Commission for alleged information disclosure violations and is slapped with a life-long market ban.

Zoneco was charged with collecting sea cucumbers during the no-fishing period in August, but the company denied these allegations.

Zoneco once again reported a mass death of scallops worth over CNY300 million, which posed a risk of inventory impairment. The cause of this mass mortality is as yet unknown.

Editor: Ben Armour