(Yicai) Jan. 19 -- Shares of Ronbay New Energy Technology plunged after the Chinese battery materials supplier said it is being investigated by China's securities regulator due to misleading statements regarding large contract transaction amounts.

Ronbay [SHA: 688005] was trading down 10.3 percent at CNY33.50 (USD4.81) as of 1.50 p.m. today, after earlier plunging by the 20 percent exchange-imposed daily limit. The stock had suspended trading since Jan. 14 due to inquiries from the Shanghai Stock Exchange over a CNY120 billion (USD17.2 billion) supply deal with Contemporary Amperex Technology that it had announced the day before.

Ronbay has received a notice of investigation from the China Securities Regulatory Commission over the value of the supply agreement it signed with battery giant CATL, the Ningbo-based company announced yesterday.

The CNY120 billion order value is merely an estimate provided by the company, and there is great uncertainty on whether the amount can be achieved, Ronbay clarified, noting that the previous announcement did not adequately highlight the potential risks associated with the agreement, and that specific terms used were not sufficiently precise or standardized.

On Jan. 13, Ronbay said in an exchange filing that it will provide 3.05 million tons of lithium-iron phosphate cathode materials worth CNY120 billion and related services to CATL's factories in China from this quarter through 2030.

Later that day, the SSE issued an inquiry letter to Ronbay, requesting the firm to provide additional explanations on how it plans to meet CATL's supply requirements for the large orders, whether it has any other undisclosed new or ongoing production capacities, or asset acquisition plans, and details on the estimation method for the contract value.

Ronbay's lithium battery cathode materials business previously focused on ternary lithium battery cathode materials and only forayed into the LFP cathode materials business last year. In December, the company announced it had gained control of an LFP cathode material factory in Guizhou province that has an annual production capacity of 60,000 tons.

Given the company's annual output of LFP cathode materials, the market raised significant questions about how Ronbay plans to rapidly increase its capacity in such a short period to meet demand from CATL.

Ronbay yesterday did not address these concerns. It merely said that it will continue to expand its production capacity for LFP cathode materials through acquisitions of existing capacities and by building new capacities. The company also mentioned that it has sufficient cash to support investments in new projects.

CATL only set commercial terms for this year's product supply, as the actual supply volume from next year will be agreed upon by the two firms in a later stage, Ronbay noted yesterday, without revealing the specific figure for this year.

On Jan. 13, the SSE also requested Ronbay to conduct a self-examination to determine whether this transaction could have potentially led to insider trading or other violations.

In this regard, Ronbay said yesterday that the general managers of its LFP business and legal department conducted short-term trading of the company's shares last month and earlier this month, respectively. However, both of them had already sold all their shares before the announcement of the supply deal with CATL.

The reason for the short-term trading by the GM of the LFP business was a "positive outlook on the company's sodium-ion battery business," while that for the short-term trading by the GM of the legal department was due to "an operational error," Ronbay explained.

Editors: Tang Shihua, Futura Costaglione