Baofeng Group Stocks Fall Following CEO's Arrest Over Bribery Allegations
The chairman and CEO of the Chinese conglomerate Baofeng Group have been arrested on suspicion of bribery.
The company mentioned in a statement on Thursday that Feng Xin was detained by authorities and will be facing charges of being involved in the bribing of "non-state" functionaries. The crime is reportedly subject to a punishment of three to 10 years in prison.
The Shenzhen-listed online video services company submitted a stock exchange filing that cited a detention notice given to them by Chinese authorities. The company did not elaborate further on the nature of the allegations, but explained that the allegations were not considered to be "corporate crime."
The firm also revealed that it did not have any further information to determine whether the allegations were related to the company itself or whether or not it would be investigated.
Local media reports citing sources close to the matter have speculated that Feng's arrest may be related to the company's recent acquisition of British sports media company MP & Silva Holding SA in 2016.
The ill-fated $750 million deal resulted in a number of lawsuits involving the company's partners, including Everbright Securities and China Merchants Bank.
Immediately following the release of the stock exchange filing, the company's stock prices plummeted by as much as 20 percent.
Baofeng Group's stock was previously one of the most successful listings on the Shenzhen Stock Exchange's NASDAQ-style tech board ChiNext. The success of the stock during its debut in 2015 immediately made Feng a billionaire.
However, the stock has since lost almost all of its value dropping to around 5.3 Yuan from a peak of 116.5 Yuan in 2015. Last year, the company reported losses of around $160 million, further deteriorating investor confidence in its stock.
The submission of the stock exchange filing comes just four days after Baofeng revealed that its CEO was placed under "coercive measures" by authorities. The various reports regarding Feng have so far had a big negative impact on the company and its employees. The company mentioned in its filing that some of the reports that have circulated regarding Feng had contained false and misleading information.
The stock exchange filing was submitted following a request by the Shenzhen bourse for the company to disclose any information it had regarding the impact of the reports on Feng's activities on the company's operations.
The stock exchange also wanted the company to elaborate its plan of action to remedy the situation. In its filing, Baofeng explained that despite the scandal, its operations are apparently still stable. The firm added that it will continue its plans of lowering operational costs and reducing its expenditures to maintain stability.