(Yicai Global) Jan. 14 -- Zhejiang Geely Holding Group has denied reports that it sold off half of its 9.7 percent stake in German auto giant Daimler AG, the firm behind the Mercedes-Benz brand.

Geely is a long-term strategic investor and Daimler's single largest shareholder, and has no plans to cut its stake in the company, it said online on Jan. 11. Bloomberg earlier cited a person familiar with the matter as saying that Geely founder Li Shufu, who spent USD9 billion to become Daimler's biggest shareholder in February, had shed 5.4 percent of the company's equity.

The report followed a regulatory filing from Morgan Stanley, which was said to have helped Geely obtain its stake in Daimler, that said the firm held voting rights tied to a roughly 5.4 percent stake in the Stuttgart-based carmaker.

Geely bought its shares in Daimler using a collar trade to control risks, the firm told financial media outlet China Securities Journal. This involves taking out protective puts and call options with matching expirations and value, and was how Li managed to build up such a large stake while circumventing shareholder disclosure rules. It also means the company's shareholding varies as the puts and calls are executed.

Daimler's share price has been declining ever since Li announced obtaining the stake in February 2018. It has fallen by 30.5 percent to EUR48.9 (USD56) from a record high just a week before the announcement -- largely down to its performance -- so Geely would have lost out considerably if it did not use the options.

Geely's acquisition of Daimler stock was not just a financial investment, it said, saying that it plans to hold onto the shares long term. The two companies unveiled plans for a ride-hailing joint venture in October last year, which will be based in the eastern Chinese city of Hangzhou and offer high-end transport services.

Editor: James Boynton