China’s troubled shipbuilder Rongsheng said it had scrapped a warrant issue that would have given the heavily indebted shipbuilder a HK$3 billion ($416 million) cash lifeline after it was unable to contact the offer's only subscriber.
A warrant entitles the holder to buy stock from the issuer at a specific price within a time frame.
Rongsheng's shares fell as much as 8.1 percent in early Thursday trade, after it said it would no longer issue HK$510 million worth of warrants to Kingwin Victory Investment Ltd, a Cayman Islands-incorporated investment firm.
At 0253 GMT, shares in Rongsheng, which have halved in price over the past year, were down 5.4 percent.
In a stock exchange filing, Rongsheng said it had scrapped the issue as it could not contact Kingwin's owner Wang Ping after media reports said he had been detained by the Beijing police for matters not related to Rongsheng.
The offer would have made Kingwin the second-largest shareholder in Rongsheng.
"The company has no information as to the details of the incident and has been unable to contact Mr. Wang Ping, which casts doubt over the ability of the subscriber to perform its obligations," Rongsheng said.
The company also said it would seek legal advice.
On Wednesday, Chinese news magazine Caixin reported that Beijing police had detained Wang on February 23 over financial irregularities in investments made by Cypress Capital Group, another firm that he chaired.
Several phone calls to Cypress Capital Group were not answered, and contact details for Wang and Kingwin are not publicly available.
Rongsheng, one of China's largest shipbuilders, was gearing to move into oil exploration and change its name after becoming one of the most prolific casualties of the global shipping slump. It came close to insolvency in 2013 before agreeing with banks to extend its loans until the end of this year.
The warrant issue that Rongsheng had agreed with Kingwin in October would have entitled subscribers to buy up to 1.7 billion new shares at HK$1.60 each.
This would have raised about HK$3.23 billion for Rongsheng, the firm said at the time.
($1 = 7.7552 Hong Kong dollars)