Several key investors of a Shanghai-listed company are cashing in their holdings after the firm received Rmb 50 million ($7.2 million) from a local government-fund, Caixin reports.
Shares of Poten Environment Group initially rose following the news that the firm would receive a bailout from a local fund, but on Tuesday the stock hit the 10% drop limit. The selloff was triggering by reports that three major shareholders would dump their entire holdings in the water management enterprise.
Poten is among dozens of Chinese listed companies that have pledged company stock in order to source desperately-needed bank loans. A liquidity crunch earlier this year had shaved over 70% of the stock’s price from January highs.
The three outgoing institutional investors make up for 31.35% of the company’s total shares. The move does not bode well for the government’s efforts to shore up market confidence following a market rout, which include encouraging local authorities to set up bailout packages for cash-strapped listed firms.