113: Chapter 113 Capital Frenzy

November 6, 9:15 AM, A-shares call auction stage.

In the trading hall of the Shenzhen Stock Exchange, on the massive electronic screen, the buy and sell order data for Spark Technology refreshed like a waterfall.

Buy level 1: 2650 yuan, 1.2 million lots, approximately 12 billion yuan.

Buy level 2: 2649 yuan, 850,000 lots.

Buy level 3: 2648 yuan, 670,000 lots...

Sell level 1: 2356 yuan (yesterday's closing price), 12,000 lots, approximately 120 million yuan.

Buying power vs. selling power: 12 billion vs. 120 million, a 100:1 ratio.

Traders stared at the screens, some whistling: "It's crazy, it's all gone crazy."

9:25 AM, the call auction ended. Spark Technology's opening price: 2650 yuan, a 10% limit up.

9:30 AM, continuous trading began. At the 2650 yuan limit-up price, buy orders instantly increased to 2 million lots, worth 20 billion yuan. Sell orders were almost zero—holders were unwilling to sell, and those who wanted to buy couldn't.

"The locked-in funds are at 8 billion!" a trader shouted.

"No, it's 10 billion!"

"15 billion!"

Five minutes after opening, buy orders at the limit-up price reached 30 billion yuan, while the total daily turnover was a pathetic 870 million yuan—all sporadic sell orders that were instantly snatched up.

What did this mean? It meant that if you wanted to buy Spark stock, you had to queue at the limit-up price, and there was 30 billion yuan of capital ahead of you. At this rate, you might have to wait a month to buy it.

In the stock forums, retail investors were wailing:

"I've been hanging orders for a month and haven't bought a single share!"

"Want to buy Spark stock? It's harder than winning a housing lottery!"

"I'm offering 2700, will anyone sell me 100 shares? Just 100 shares!"

"Wake up, the person above; 2700 is 50 yuan higher than the limit-up price, but no one is selling. Those holding the shares are long-term investors; who cares about this 50 yuan?"

The Dragon and Tiger List data showed that the top five buyers were all institutional seats, totaling 1.2 billion yuan—this was already the vast majority of the day's turnover. The top five sellers added up to less than 50 million yuan.

A private equity fund's trading director posted on his social media:

"Spark's liquidity is drying up. There are 142 million tradable shares in total. Calculated at today's closing price of 2650 yuan, the tradable market value is 376.3 billion. Yet, those wanting to buy today have 30 billion in cash waiting in line."

"This is a classic short squeeze. The shorts are dead, and the longs want to buy but can't, so they have to keep raising their bids. But the problem is, once someone starts selling..."

He didn't continue, but those who understood, understood.

The next day, November 7.

Opening price: 2705 yuan, continuing a 10% limit up. Locked funds: 15 billion yuan.

Turnover: 650 million yuan, even less than yesterday.

Turnover rate: 0.25%, meaning only 0.25% of the tradable shares changed hands.

Third day, November 8.

Opening price: 2976 yuan, limit up. Locked funds: 20 billion yuan.

Turnover: 580 million yuan.

Turnover rate: 0.18%.

Fourth day, November 9.

Opening price: 3274 yuan, limit up. Locked funds: 28 billion yuan.

Turnover: 420 million yuan.

Turnover rate: 0.15%.

For four consecutive days, it hit the limit up every day, with daily turnover decreasing and the turnover rate decreasing. Liquidity was evaporating like water in the desert.

CICC Research Institute urgently issued a report:

"Spark Technology: Liquidity Crisis or Value Discovery?"

The report pointed out:

"Spark Technology's tradable market value accounts for only 13% of the total market value, with less than 500 billion yuan in actual tradable chips. Meanwhile, market buy demand exceeds 100 billion yuan, creating a severe supply-demand imbalance."

"This imbalance leads to two results: First, the stock price detaches from fundamentals and is driven purely by capital; second, once there is bad news, it may trigger a stampede-like decline because profit-taking has accumulated huge floating profits."

Recommendation:

"Regulatory authorities should consider guiding state-owned shareholders to moderately reduce their holdings, increase market supply, and stabilize stock price fluctuations. At the same time, it is recommended that Spark Company appropriately release bad news—such as issuing risk warnings or announcing performance early (expected to be very good) to give the market a reason to adjust."

This report was sent to the CSRC.

On the evening of November 9, the CSRC's Listed Company Supervision Department summoned Lin Wan, the board secretary of Spark Technology.

The meeting took place in a small conference room at the CSRC, the atmosphere formal but not tense.

"Secretary Lin, Spark's stock price has hit the limit up for four consecutive days; the market heat is very high," Director Li from the Supervision Department began politely.

"Yes, thank you for the market's recognition of Spark," Lin Wan replied appropriately.

"But the heat is too high, and there are risks." Director Li pulled up the data. "Look, the turnover rate has dropped to 0.15%, which means the stock is almost illiquid. Once there is any disturbance, it may fluctuate violently."

He paused: "We suggest that the company can appropriately release some good news to guide the market rationally. For example... announce the third-quarter performance in advance? We understand that your performance is very good."

Lin Wan thought for a few seconds, then said: "Director Li, thank you for your suggestion. But Spark's principle is—do not manipulate the stock price, do not cooperate with speculation. The performance report will be released as originally planned on November 15. Before that, we will not release any news."

"Then at least issue a risk warning announcement?" Director Li took a step back. "Remind investors to pay attention to risks and invest rationally."

This time Lin Wan agreed: "That we can do. We will issue an announcement."

That night at 10:00 PM, Spark Technology released the "Risk Warning Announcement Regarding Abnormal Stock Trading Fluctuations":

"The company's stock has recently hit the limit up continuously, with a large increase. The company's production and operation are normal, and there is no major information that should be disclosed but has not been. We ask investors to pay attention to investment risks, invest rationally, and make prudent decisions."

The announcement was short and very official. But the market read a different message—the company had started to warn of risks.

The fifth day, November 10.

9:25 AM, call auction. Opening price: 3591 yuan, continuing a 10% limit up.

But today's atmosphere was different. The locked funds at the limit-up price were only 8 billion yuan, much less than the 20 billion and 28 billion of the previous days.

9:30 AM, continuous trading began.

The buy orders at the 3591 yuan limit-up price were quickly eaten up. 9:31, the limit up opened.

The stock price began to dive:

3591 → 3550 → 3500 → 3450...

It hit a low of 3254 yuan, a decline of 7.7%.

The stock forums exploded:

"It finally opened! Charge!"

"Only a fool would charge, this is clearly selling off!"

"I picked up 1 million shares at 3254! Brothers, I'm in!"

"Big shot above! 1 million shares is 3.25 billion!"

The mysterious buyer who bought 1 million shares at 3254 yuan instantly became the focus. The Dragon and Tiger List later showed that it was an "institutional seat"—a certain large public fund.

But even more striking was the seller—also an institutional seat, which sold those 1 million shares. This meant that an institution chose to take profits after the limit-up board opened.

"Finally, someone sold," the trading director at CICC sighed in relief. "Only with sell orders can the market be healthy."

That day, Spark Technology's stock price fluctuated between 3250-3400 yuan, ultimately closing at 3254 yuan, down 7.7% from the previous day, but still up 38% from five days ago (November 3 closing at 2356 yuan).

Total market value: 3.5794 trillion yuan.

A-share market value ranking third, second only to Kweichow Moutai (3.8 trillion) and Industrial and Commercial Bank of China (3.6 trillion).

A technology company that carried an "ST" label four years ago now had a market value exceeding giants like PetroChina, Ping An, and China Merchants Bank.

After the market closed, Shen Nanpeng made an analysis report internally at Spark:

"Over five days, cumulative buy funds exceeded 50 billion yuan, with actual turnover only 15 billion yuan. This means there is still 35 billion in capital waiting on the sidelines to enter."

"The top ten holders of tradable shares (excluding Su Chen) all stated they would not reduce holdings in the short term. They believe Spark's true value is undervalued, and the current stock price is just the beginning."

"But the risks are also very clear: the valuation has already overdrawn the next two years of performance. According to our earnings forecast, Spark's net profit in 2017 will be approximately 100 billion yuan, corresponding to a P/E ratio of 35 times. While Apple's P/E ratio is 25 times, and TSMC's is 20 times."

"Once performance falls short of expectations, or there is bad news, it may trigger a stampede."

The last sentence of the report was: "We are creating history, but we are also standing on the edge of a cliff."