Summary of the Key Points
Yaojie Ankang is a non-profit biotech company that went public on the Hong Kong Stock Exchange in June 2025. Taking advantage of loopholes in the Hong Kong stock market system (very low trading volume, passive index allocation, and relaxed refinancing policies), as well as A-share investors' lack of understanding of the Hong Kong market ecosystem, its stock price was hyped up to a market value of HK$27 billion, on par with that of BeiGene. However, when the restricted shares became eligible for sale one year after the listing, the stock price plummeted by 98%, reducing the market value to just HK$4.1 billion. This was essentially a well-orchestrated “scam”.
I. Creating a Concept: Using a “18A Story” to Inflate the Stock Price
Yaojie Ankang utilized the Hong Kong’s “18A route” for non-profit biotech companies to go public. Its prospectus featured the story of a “world-first FGFR inhibitor for the treatment of cholangiocarcinoma”—a rare disease with unmet medical needs, which sounded promising. In reality:
- Lack of Profitability: Revenue from 2023 to 2025 was less than HK$30 million, resulting in a cumulative loss of HK$800 million; there was no consistent revenue stream.
- Weak Pipeline: The company only had one core product in the late clinical stage, with the rest being in the early stages of development.
- Fierce Competition: Similar FGFR inhibitors from Incyte and Johnson & Johnson were already on the market, limiting the potential market for Yaojie Ankang’s product even if it was approved.
In short, the company used the label of an “innovative drug with limited availability” to attract attention from sell-side research reports and speculative investors, but its fundamentals were weak.
II. Inflating the Bubble: Extremely Low Trading Volume + Passive Funds Drive the Stock Price Up 50 Times
At the time of listing, only 1.38% of the total shares (397 million shares) were actually tradable, with a trading value of less than HK$80 million. This coincided with several favorable factors:
- Index Inclusion: The company was added to the Hang Seng Small Cap Index in August 2025 and became eligible for the Hong Kong Stock Connect program in September, attracting investment from index-tracking ETF funds.
- Passive Buying Obligation: These funds were required to buy shares according to their weightings, regardless of the price.
This created a severe imbalance between supply and demand. Active investors fueled the price rise, while passive funds bought in, and speculative traders took advantage of the situation. The stock price soared from HK$70 to HK$679.5 within eight trading days (a 50-fold increase), pushing the market value to HK$27 billion—equivalent to half of the annual sales of the global pharmaceutical giant Keytruda, which generates over HK$20 billion in revenue. However, Yaojie Ankang had no revenue at all, creating a mere “liquidity illusion”.
III. Accelerated Collapse: Three Discounted Offerings + Share Release
After the stock price soared, the company conducted three discounted offerings within less than a year (from January to May 2026), with the price dropping from HK$92.85 to HK$40.83 per share. This indicated growing skepticism about its valuation.
- Signs of Share Release: In early June, the major shareholder transferred 9.61 million shares to the Central Clearing and Settlement System (CCASS), a typical signal that shareholders were preparing to sell.
- Catastrophic Impact of Share Release: On June 23, 90% of the restricted shares (382 million shares) became eligible for sale. These early-stage investments by VCs/PEs had costs in the few HK dollars range; selling them at HK$11 would result in substantial profits. The stock price dropped by 50% on the first day of trading, further falling by 59.71% the next day, and another 11% on the third day, reducing the market value to HK$4.1 billion.
IV. Systemic Loopholes: Why This Happened in Hong Kong but Not in A-share Markets?
Such a scenario is almost impossible in A-share markets due to different regulations:
- Trading Volume: A-share markets require a minimum issuance ratio (e.g., not less than 25%), preventing extreme trading volumes like 1.38%.
- Price Limits: A-share prices are capped at 10% or 20%, preventing sharp daily fluctuations.
- Refinancing: A-share private placements require registration and approval, with limited discounting; in contrast, Hong Kong allows flexible discounted offerings.
- Share Sales: Major shareholders in A-share markets must disclose their intentions in advance and follow restrictions; in Hong Kong, they can sell shares freely on the day of release.
The Hong Kong system emphasizes “information disclosure as the foundation, with buyers bearing the risk.” While this promotes innovation, it also creates opportunities for speculative investors.
V. Lessons Learned: This Is Not an Isolated Case
Yaojie Ankang is not the first company to experience this pattern. Other 18A-listed companies like Sididi and Baixinan have also seen similar episodes of rapid price increases followed by sharp declines. The lessons are:
- When investing in Hong Kong’s innovative biotech stocks, focus on more tangible aspects such as revenue and pipeline progress.
- Be cautious of stocks with extremely low trading volumes, as they are vulnerable to market manipulation.
- Passive funds can be caught in the same traps, as they are forced to buy shares according to index requirements, regardless of their valuation.
- The “freedom” of the Hong Kong market is a double-edged sword; it supports innovation but also allows for bubbles to form. Investors must be vigilant.
The dramatic drop from HK$27 billion to HK$4.1 billion highlights the challenges and opportunities in the Hong Kong stock market ecosystem. While innovation is encouraged, investors need to be discerning to avoid such pitfalls.
This analysis breaks down the complex financial news into easy-to-understand language, covering all key aspects of the story: creating a concept, inflating a bubble, the subsequent collapse, the underlying systemic reasons, and the lessons for investors.