(Yicai Global) July 4 -- Ganfeng Lithium announced that China’s securities regulator is investigating the supplier of key raw materials for electric vehicle batteries for insider trading, the practice of trading shares to one’s own advantage by having access to confidential information.

Ganfeng Lithium is involved in insider trading on the secondary market of the stock of a listed Chinese company, the Xinyu, Jiangxi province-based firm said late yesterday, citing a notice of case-filing it received from the China Securities and Regulatory Commission on July 1.

The announcement did not mention any further detail, but stressed that the investigation will not have any impact on Ganfeng Lithium’s normal production and business.

Ganfeng Lithium [SHA: 002460] closed down 1.4 percent at CNY110.33 (USD16.48) today. Its Hong Kong-listed shares [HKG: 1772] fell 3 percent to HKD83.70 (USD10.67) as of 3 p.m. today. The company’s share opened the day down as much as 7 percent.

Li Liangbin, chairman of Ganfeng Lithium, admitted in an interview that the company was under probe mostly because of the acquisition of Jiangxi Special Electric Motor’s shares while negotiating business cooperation with the Chinese electric machinery and lithium-ion battery materials producer, National Business Daily reported today.

As a result, “The investigation may lead to fines for the listed company,” Li said, adding that the company may not be able to refinance for about a year.

Ganfeng Lithium began to negotiate cooperation with Jiangxi Special Electric on June 18, 2020, and bought its shares on the secondary market on June 23, Li noted. On Aug. 19, the firm announced that it would be responsible for the operation of Jiangxi Special Electric’s lithium carbonate and lithium hydroxide production plants in the next two and a half years, but the pair decided to call it quits in late October that year, Li said.

Special Electric Motor [SHE: 002176] ended 3.9 percent up at CNY28.10 (USD4.20) today. The stock skyrocketed 1,950 percent between June 2020 and September 2021.

It is not clear how much Jiangxi Special Electric Motor’s share Ganfeng Lithium bought in June 2020, nor how much profit it has made from the investment. It is also unknown weather the company is still held the stake.

Ganfeng Lithium is one of the main suppliers of lithium hydroxide and lithium carbonate, two main raw materials for the production of positive electrodes for lithium batteries. Its international customers include Tesla and Belgian power battery cathode material developer Umicore.

Editor: Futura Costaglione