(Yicai Global) Aug. 9 -- Chinese pharma firm Ji Yao Holding is under regulatory investigation for information disclosure irregularities, the company said in a statement yesterday. 

Its shares [SHE:300108] fell over 3 percent on the news.

Jilin province-based Ji Yao received a notification of investigation from China Securities Regulatory Commission for these violations, per the statement, which did not specify the nature of these charges, however.

Kang Shaohua, the company's supervisory independent director required under Chinese securities law, stepped down for "personal and career reasons" on Aug. 5, he said in a statement that day. Kang was set to serve until Sept. 6 next year.

Ji Yao, which is worth less than CNY5 billion (USD709 million), was purportedly poised to buy Xiuzheng Pharmaceutical Group, one of China's largest drug makers, Ji Yao announced on July 11. Tonghua, Jilin province-based Xiuzheng Pharmaceutical, which owns several best-selling medicines, had CNY64 billion in sales in 2017. It planned to leverage the deal for a backdoor listing, market investors believed. 

Ji Yao shares suspended trading on the same day.

Ji Yao then canceled the deal in a July 24 statement that cited the CSRC's amendment of the 'Measures for the Administration of the Material Asset Restructurings of Listed Companies' as the grounds for this retreat. It will resume its takeover bid after the revised regulations are ready, the company said on July 24, whereupon its stock resumed trading, rising to the 10 percent daily limit up for two straight days as investors expected it to make out like a bandit on the supposed deal.

Xiuzheng Pharmaceutical denied on July 26 that it planned to continue the restructuring with Ji Yao, which in turn claimed its staff uploaded the wrong document when publishing the announcement, in an effort to explain the two company's conflicting statements. 

The Shenzhen Stock Exchange issued two inquiry letters directing Ji Yao to explain its reasons for and the legality of canceling the equity transfer and asking whether the company had deliberately suspended its stock, and if the firm traded in its own shares afterwards.

Ji Yao' s stock has continued its slide following the SSE query, bottoming out in a 30 percent drop today at CNY4.08 (USD0.58). Its share price is now CNY4.19, down 3.23 percent, while the overall ChiNext index has only fallen 0.38 percent thus far.

Editor: Ben Armour