Shares in China Huishan Dairy Holdings plunged more than 90% on Friday, wiping around US$4 billion off its market value before trading was halted – its second trading suspension in three months.
It was not immediately clear what triggered the slide.
In December, US-based short-seller Muddy Waters questioned the firm’s profits and said it had inflated spending on its cattle farms to artificially raise capital expenditure figures.
Muddy Waters said at the time it believed the Chinese dairy firm to be worth “close to zero” because it had misrepresented its self-sufficiency on alfalfa (which is used as feed for cattle), was over-leveraged and had overstated its spending.
China Huishan has said the allegations are groundless.
Trading volume on Friday soared to 779 million shares, with the bulk of the sell-off occurring in the last 20 minutes of trading before midday.
The shares fell to as low as HK$0.25 before edging back up to HK$0.42, when trade was halted.
Officials for China Huishan, whose market value now stands at HK$5.66 billion (US$729 million), could not be immediately reached for comment.
China Huishan Chairman Yang Kai controls the company through Champ Harvest, which owns 72% of the firm.
Champ Harvest has a HK$2.4 billion banking facility with Ping An Bank, which is secured by stock held by the controlling shareholder.