(Yicai) May 14 -- Shares of Red Star Macalline Group fell after the Chinese furniture retailer said founder Che Jianxing has been detained by the authorities and is under investigation.

After falling by as much as 3.7 percent in Shanghai earlier today, Macalline [SHA: 601828] closed 1.4 percent lower at CNY2.91 (40 US cents) a share. Its Hong Kong-listed stock [HKG: 1528] lost 2.1 percent to end at HKD1.37 (18 US cents).

Che, who is an executive director and general manager of Macalline, was detained and is under investigation by the Yunnan Provincial Supervisory Committee, the Shanghai-based firm said yesterday. Macalline has not yet received any written notice of lien or notice of case filing, neither has the committee asked for its help with the investigation or for information, it added.

Chairman Li Yupeng will act as GM during the period of the investigation, the company said, adding that it is operating normally and the probe will not significantly impact its daily operations.

Che is the second founder of a major furniture retailer to be placed under investigation in less than a month. Easyhome New Retail Group announced on April 17 that Chairman Wang Linpeng had accepted an investigation by Jianghan District Supervisory Committee in Wuhan.

Under Chinese law, supervisory committees investigate cases involving public officials suspected of work-related crimes. They can also scrutinize members of the public in cases where public officials are suspected of being involved in crimes such as bribery, instruction of bribery, and other work-related offences.

Che, a legendary figure in China's home furnishing sector, opened his store with a CNY600 (USD83) loan. He founded Macalline in 2007, which later became the country's largest home retail chain with nearly 400 outlets nationwide. In 2020, Che was the sector’s wealthiest individual, with a net worth of CNY43 billion (USD6 billion).

After China’s real estate market slumped in 2021, Macalline's business began to struggle. In 2023, Che sold a controlling stake to state-owned Xiamen C&D and stepped down chairman while continuing to serve as an executive director and GM.

Despite Xiamen C&D's takeover, Macalline's earnings have not improved. Its net loss widened 67 percent to CNY513 million (USD71.1 million) in the first quarter of this year from a year earlier after revenue sank over 23 percent to CNY1.6 billion (USD223.9 million).

Editors: Tang Shihua, Futura Costaglione