TIANQI Lithium Corp. halted a private share sale plan after the Shenzhen Stock Exchange queried the deal.

The company said Sunday it had terminated the plan, announced Friday, that would see it raise as much as 15.9 billion yuan (US$2.5 billion) by issuing stock to controlling shareholder Chengdu Tianqi Industry Group Co. at 35.94 yuan per share, about 40 percent below its last closing price. Tianqi said it scrapped the deal to avoid short-swing trading and protect the interests of smaller shareholders.

The proposal for Chengdu Tianqi to buy shares comes the same month it said it would reduce its stake, along with other holders, by up to 4 percent over a six-month period starting Jan. 29. The company had also completed a 6 percent share sale plan announced last year.

Over the weekend, the Shenzhen exchange queried Tianqi’s announcement made Friday, asking whether Chengdu Tianqi’s subscription to the private placement plan after earlier reducing its stake constitutes a short-term transaction and if it hurts the interests of small and medium shareholders.

The bourse noted Tianqi Lithium’s share price had tripled over the past 60 trading days and asked the company whether any insider information had been leaked, as well as if the plan is feasible.

While it wasn’t a surprise for Tianqi to conduct a private placement, the amount and timing were unexpected, Daiwa Capital Markets Hong Kong Ltd. analysts Dennis Ip and Leo Ho wrote in a report. The announcement runs a high chance of constituting short-swing trades despite not directly breaching listing rules, they wrote.

“While we disagree with this view given Tianqi’s distinctive financial condition, we do understand that the regulatory body may have reservations on approving such a private placement given it could be a ‘bad precedent’ that encourages major shareholders of other listed companies to follow and ‘buy low, sell high,’” they said. (SD-Agencies)