A view of Zhangzidao's scallop in August Photo: VCG

A former top seafood company in China's stock market that has made repeated claims in recent years that its products were washed away by ocean currents has made a similar statement recently, except this time, it said outright that the scallops were probably dead.

The company was being investigated by Shenzhen securities authorities on Monday, and its shares fell by the daily limit of 10 percent on Tuesday.

Zhangzidao Group Co (Zoneco), which repeatedly attributed substantial losses to a dramatic drop in scallop output caused by natural disasters, saw its shares fall to 2.7 yuan ($0.39) per share on Tuesday. 

Experts said penalties for the company could be heavy given that the China Securities Regulatory Commission (CSRC) is giving special importance to transparency and disclosure to safeguard shareholder value. 

In July, the CSRC imposed a fine of 600,000 yuan on the company after a 17-month investigation for suspected misrepresentations over the past few years.

Dong Shaopeng, an adviser to the commission, told the Global Times on Tuesday that the company, after repeated disclosure glitches, faces the prospect of delisting.

"Nature can't always be the excuse, after all this is a specialist firm. It is reasonable to believe that there has been some frauds recorded in the company's account, which can lead to delisting," Dong said.

Zoneco said on Monday that about 80 percent of its scallops, which it farms on the seabed, died recently and the company was of the initial opinion that there's the risk of a major write-off of up to 300 million yuan.

The company added that in the maritime environment, severe weather could threaten aquatic products and mass deaths have taken place in Japan, Canada, Peru and in sea farms off the coast of East China's Shandong Province. 

However, it is not the first time that the company reported the sudden disappearance of its products. In 2014, the company said its scallops were carried away by currents. In 2017, it said its scallops starved to death, according to the Beijing News newspaper on Tuesday.

The company's repeated claims have been scoffed by Chinese A-share investors since 2014, when the one-time No.1 seafood company in China's stock market first cited it as an explanation of a substantial loss.

"How many times do you think I'll swallow the same story?" said a post that received many likes on Tuesday.

Within hours of the latest claim, the Shenzhen Stock Exchange issued an inquiry about the company's disclosure, asking the company to specify whether there have been any attempts to hide or delay the disclosure of potential write-offs. 

In particular, the regulator is asking the company about the timing of the alleged mass deaths and why the company postponed the checkup on its sea farms to early November, while its competitors usually do checkups in September and October.


Newspaper headline: Zhangzidao ‘faces delisting’ after new claim of scallop losses