The Shenzhen Stock Exchange has asked luxury real estate company Tahoe Group to explain what appears to be a suspicious dividend and stock issuance announcement.

Tahoe recently proposed giving all existing shareholders 10 free shares and a 2.2 yuan ($0.33) dividend for every 10 shares they already hold.This is the first announcement of its kind by the company since it went public in 2010.

The plan will not change investors’ total equity, but will essentially reduce the price of each share by increasing the total number of shares. This lowered price could in turn attract more retail investors, and possibly boost demand so much that the stock’s trading price is lifted above its value prior to the dividend issuance, an industry insider told Caixin.

The stock exchange suspects the whole plan could be aimed at assisting holders of Tahoe shares who had used those shares as collateral to get loans. Tahoe may be hoping that those lenders, worried about Tahoe's falling share price, might force a sale of the shares used as loan collateral in order to stem their losses. So if the share price goes up, those lenders might not try to force such sales.

Tahoe's share price fell from a peak of 43.47 yuan in 2017, to 13.31 yuan in January 2019.

The stock exchange also suspects the company leaked information of the issuance before the official announcement, as intensive trading was detected last month, when the stock climbed 33%.

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