The Shenzhen-based corporate software company Kingdee appeared to be a success story – until a prominent investor and stock market analyst in Hong Kong sent its stock into a nosedive by dubbing it a bubble on his website Monday.

David Webb, one of Hong Kong’s most famous stock pickers, wrote on his website that Kingdee may not be as profitable as it seems. Rather, the company “has relied on sector-specific tax breaks, government grants, property investment gains and questionable transactions with related parties” to present profits to investors, he said.

Kingdee’s Hong Kong-listed stock has more than tripled over the last two years, but its share price plunged as much as 14.77% during market time Monday after Webb’s report, and it closed as the worst performer on the Hang Seng Composite Index. The stock continued to take a hit Tuesday, closing nearly 3% lower at HK$8.84 ($1.12) on Tuesday. 

Webb explained his “bubble stock” theory by listing a number of potential risks to Kingdee investors that might not be listed on the company’s financial statements: property investments and state favors covering up low profitability of its core businesses, company disclosure flaws, and possible breaches of corporate governance code.

Webb, a former investment banker, did not specify whether he had a short position in the shares. The company did not respond to Caixin’s enquiries at press time.

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