(Yicai Global) July 8 -- Shares in China's Kingdee International Software Group hit a six-month low this morning after the firm issued a profit warning and revealed that founding executives were selling off their company stock.

The Shenzhen-based firm's share price [HKG:0268] stooped as low as HKD6.76 (87 US cents) a share this morning, down 16 percent. It had clawed back to HKD6.90 when the market closed at 4 p.m.

Several ratings agencies have since lowered their valuation of the firm's stock, including China International Capital, which reduced its appraisal to CNY7 (USD1) from CNY9, and Citigroup, which cut its valuation to HKD8 from HKD11.8.

Kingdee announced on July 5 that it expected net profit over the first half to be between CNY102 million (USD15 million) and CNY119 million, down 30 percent to 40 percent despite revenue rising as much as 20 percent to CNY1.5 billion (USD223 million). It put the falling profit down to increase investment in its cloud transformation strategy.

Just over two weeks earlier, founder and Chairman Xu Shaochun sold 60 million shares in the firm at CNY8.4 apiece, reducing his holdings to 22.3 percent from 24.1 percent. Other executives have repeatedly sold shares in the secondary market since May, public data shows.

The move brought Xu's behavior into question as Chinese listing rules forbid directors from buying or selling company shares within the 60 days prior to annual earnings announcements or 30 days before quarterly and semi-annual reports.

But Kingdee defended the sale by saying that it announced Xu's selloff in March and there were records to prove so. His sale accounts for less than 10 percent of all shares held by individuals and was the first time in a decade he had sold Kingdee stock, it added, saying he plans to use the money to settle personal loans and donate to charity.

Management remains confident in the company's long-term strategy, it added.

Editor: James Boynton