Jiumaojiu (HK: 9922) shares were down 14% at one point in Hong Kong today. They've since risen - after a suspension of trading - to 8% down on the day. The problem was news announced on Friday and it's taken time for the market to absorb the implications. By HK standards this is a significant move in the price of a major stock - so there is something to think about here. This isn't like some junior miner on the ASX moving the same percentage which we could take as being almost normal.
Jiumaojiu runs a chain of Chinese restaurants. Well, someone is going to and why not have such a company as a stock market listing? Varied other forms of food for the masses are quoted, varied American fast food chains for example. So the base idea isn't odd in the slightest. However, events on Friday did rather raise some eyebrows.
One issue was that the CFO resigned. Well, OK, that happens, but an unexpected resignation of the person who controls the books is one of those things people worry about. Because what if it's like Patisserie Valerie, that well known disaster on the London Stock Exchange? Where the CFO resignation is brought about by the counting that is the job not having been done well?
Jiumaojiu share price from Hong Kong Stock Exchange
As we can see Jiumaojiu opened well down and then continued falling. At which point the circuit breakers come into effect and trade is suspended for that hour or so. That's the flatlining in the middle there. After everyone's had that pause for breath, a time for consideration, the price starts to recover, which is how we end up with the close only 8% down after the 14% intraday fall. Actually, the intraday was possibly closer to 15%.
As background of course restaurant chains within China have been badly hit by the recent lockdown issues. Some are recovering, like Haidilao, and that's taken as a sign for the sector. But what makes people nervous is that, as Warren Buffett says, it's only when the tide goes out that you can see who has been swimming without shorts on. So, given the recent bad times there's just some worry about the finances of such restaurant chains. Unexpected resignations of CFOs are the sort of thing to trigger those worries.
What happens next, well, it depends on how well Jiumaojiu can quell such jitters. We could see a return to the previous price level if it becomes obvious that there's no concern with the accounts. And of course things could get much worse if there are problems there.
