(Yicai Global) Dec. 31 -- Gree Real Estate’s stock price fell by the daily trading limit after the Chinese property developer said the authorities are investigating its chairman over suspected insider trading. The probe could derail the firm’s planned USD1.87 billion acquisition of a leading duty-free retailer.

State-owned Gree Real Estate revealed late yesterday that Lu Junsi had received an notice from the China Securities Regulatory Commission that he was being probed on suspicion of insider trading. It did not disclose details of the breach.

Lu can perform his duties normally during the investigation and it will not affect the company’s business activities, the announcement said. But according to regulations, Gree Real Estate’s acquisition of Zhuhai Duty Free Enterprises Group could be suspended or terminated.

Gree Real Estate’s shares [SHA: 600185] plunged 10 percent today to close at CNY6.46 (99 US cents) each, trimming the Zhuhai-based company’s market value to CNY13.3 billion (USD2 billion).

Gree Real Estate proposed on Oct. 30 to buy Zhuhai Duty Free for CNY12.2 billion (USD1.87 billion) in a cash and new shares deal to boost its tax-free business. Both companies are actually controlled by the Zhuhai State-owned Assets Supervision and Administration Commission.

Gree Real Estate revealed its plan to acquire Zhuhai Duty Free in May. From May 25, its shares hit the upper trading limit for eight trading days in a row, catching the attention of regulators. The Shanghai Stock Exchange sent it an inquiry letter on June 4, asking Gree Real Estate to clarify on insider trading rumors.

Despite denying the existence of insider trading, Gree Real Estate’s stock price continued to fall in the second half of the year. It is down 60 percent from an all-time high in July.

Editor: Peter Thomas