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The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against Health and Happiness (H&H) International Holdings Ltd (Health and Happiness) for failing to disclose price sensitive information as soon as reasonably practicable.
Health and Happiness was known as Biostime International Holdings Ltd (Biostime) when the alleged breach of the statutory corporate disclosure requirements occurred (Note 1).
The SFC has also commenced proceedings in the MMT against Mr Luo Fei, Biostime’s Chairman, Chief Executive Officer and Executive Director for his reckless or negligent conduct causing the alleged breach by Biostime of the provisions of the statutory corporate disclosure regime.
On 23 July 2015, Biostime issued a profit warning announcement in which it stated that the revenue and the profit of the Group for the six months ended 30 June 2015 were expected to decrease by approximately 11 per cent and 36 per cent, respectively, as compared with the corresponding period in 2014. Following the publication of the profit warning, Biostime’s share price closed at $16.94 on 24 July 2015, representing a decrease of 21.6 per cent when compared with the previous closing price.
The SFC found that in mid-June 2015, the consolidated management accounts of the Group for the first five months of 2015 became available which revealed that both the revenue and the net profit had significantly decreased by 13.7 per cent and 28.9 per cent, respectively, when compared with the corresponding period in 2014. This information about the financial deterioration came to the knowledge of Biostime and Luo on or around 23 June 2015. However, Biostime did not disclose such information to the public until 23 July 2015, when it issued the profit warning (Note 2).
The SFC alleges that the information about the financial deterioration was specific information regarding Biostime, price sensitive and not generally known to the public at the material time. Had the information been known to the investing public, it would have been likely to materially affect the share price of Biostime (Note 3).
Notes:
1. Biostime was listed on the Main Board of the Hong Kong Stock Exchange on 17 December 2010 and renamed as Health and Happiness on 8 June 2017.
2. The consolidated management accounts for the first five months of 2015 showed:
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- a drop in revenue by 54.5 per cent in May 2015 when compared with the revenue in April 2015;
- a drop in revenue by 48.9 per cent in May 2015 when compared with the revenue in May 2014;
- a drop in revenue by 13.7 per cent in the first five months of 2015 when compared with the revenue in the first five months of 2014;
- a decrease in profit after tax by 28.9 per cent in the first five months of 2015 when compared with the profit after tax in the first five months of 2014.
3. The share price of Biostime fell 11.5 per cent from $16.94 on 24 July 2015 to $15 on the next trading day on 27 July 2015.
4. A copy of the SFC’s Notice commencing the MMT proceedings is available on the MMT’s website (www.mmt.gov.hk).
