A Chinese pediatric-drug maker long flagged for weak results and governance problems saw 23.9 million shares — roughly 5.97% of its issued stock — sold at a judicial auction, underscoring how creditor enforcement is reshaping ownership in troubled listed companies. The company, ST Huluwa (stock code 605199), announced that the lots were fully bid and that multiple private individuals and funds emerged as buyers, with one natural-person bidder, Peng Peidong, becoming the largest purchaser.
The auction split the 23.9 million shares into 12 lots and attracted both private equity vehicles and retail buyers. A private fund named Saishuo Qihang No.3 acquired two 2-million-share lots, while Peng Peidong won four lots totaling 8 million shares for about RMB 50.21 million. Other individual buyers picked up the remaining packages at prices ranging between roughly RMB 12.16 million and RMB 12.99 million per lot. After the disposals, the controlling shareholder, Huluwa Investment, said its holding will fall to 143 million shares, or 35.79% of the company, and that the change will not alter control.
The sale is the direct result of a share-pledge dispute. Huluwa Investment had pledged shares to Shandong International Trust in October 2024; contractual early-redemption clauses were triggered and the trustee sought court action, which led to the freezing and ultimate auction of the pledged stock. High levels of equity pledging are common in China, and when corporate performance falters they frequently precipitate forced sales and fragment ownership.
ST Huluwa’s operational and financial picture helps explain why lenders pressed their claim. The company has posted consecutive annual losses, with a 2024 attributable net loss of about RMB 274 million and a 2025 guidance pointing to a further loss of RMB 210–310 million. Liquidity is tight: cash on hand stood at approximately RMB 111 million against short-term borrowings of some RMB 467 million, and an overall leverage ratio near 74%. The major shareholder’s pledge ratio has been substantial — about 97.2 million shares pledged as of January 21, representing a pledge rate of 58.18%.
Governance concerns compound the financial stress. The China Securities Regulatory Commission has opened a probe into alleged information-disclosure violations involving the company and its chair, Liu Jingping. ST status was applied after a 2023 internal-control audit issued a negative opinion citing premature revenue recognition and anomalous pricing. Those findings prompted investor litigation risks and helped drive the stock to halve in value over the past year.
For the sector and market, the episode illustrates a confluence of forces: industry policy adjustments and shifting market demand have squeezed margins, capital-intensive moves such as commissioning a new production base have lifted depreciation and finance costs, and high pledge ratios have made listed shares a ready target for creditor enforcement. Although Huluwa Investment remains the controlling shareholder on paper, the dispersal of a near-6% block to several new owners can alter the company’s shareholder dynamics and invite further short-term volatility.
The wider signal to investors is clear. Judicial auctions are a routine enforcement mechanism in China’s capital markets and often mark a turning point for companies under stress — accelerating ownership fragmentation, raising the probability of follow-on forced sales, and amplifying governance scrutiny. Market participants will watch the CSRC investigation, potential investor lawsuits, and whether additional pledged stakes come under pressure, all of which will determine whether ST Huluwa can stabilise its finances or slide into deeper distress.