(Yicai Global) Aug. 30 -- Shares in TCL Electronics Holdings plunged as much as 11.7 percent today and those in refrigerator manufacturer Guangdong Homa Group by the exchange-imposed limit after China’s securities regulator said that it is investigating suspected irregularities in the acquisition of Homa by a sister company of the Chinese TV giant.

The share price of TCL Electronics, which is the listed unit of TCL Industries Holdings, [HKG:1070], closed down 4.1 percent at HKD3.68 (USD0.47) with a market capitalization of HKD9.1 billion (USD1.1 billion). Earlier in the day it slumped 11.7 percent to HKD3.39.

Homa’s stock [SHE:002668] sank 5 percent to CNY5.09 (USD0.74), giving it a market capitalization of CNY5.5 billion (USD795.4 million). Homa’s shares are billed as ‘special treatment’ after the firm racked up two consecutive years of losses and thus trading is capped at 5 percent in either direction, unlike the usual 10 percent limit on mainland markets.

The China Securities Regulatory Commission has opened a probe into TCL Home Appliances Group, another subsidiary of TCL Industries and majority shareholder in Homa, due to suspected violations of securities laws and rules in the takeover process, Zhongshan, southern Guangdong province-based Homa said yesterday, without going into further detail.

TCL Home became a majority stakeholder in Homa in May last year, through the gradual accumulation of shares bought on the open market, with 24.9 percent equity. Last August the Huizhou, Guangdong province-based firm offered CNY1.5 billion (USD230 million) to other shareholders to increase its stake to nearly 50 percent. As of the first half this year, it owned 48 percent of Homa.

TCL Home might be planning to use Homa as a ‘shell’ for a backdoor listing of its white goods business, but any regulatory turmoil will shelve this plan, an industry insider told Yicai Global.

Founded in 2002, Homa was once China’s biggest refrigerator exporter until its former majority shareholder Zhao Guodong started to turn it into a financial holding group. It ran up huge debts in three of the last four years, losing CNY79.9 million (USD11.6 million) in 2021 and CNY987 million (USD142.8 million) in 2020, due to losses incurred by its online finance business.

Editors: Dou Shicong, Kim Taylor