Hong Kong riot supporter Jimmy Lai (center) leaves the Kowloon City police station in Hong Kong on Friday after being arrested for taking part in an unauthorized assembly on August 31, 2019. Photo: AFP

Stock prices of Hong Kong media firm Next Digital, run by Apple Daily publisher Jimmy Lai Chee-ying, surged for a second straight day on Tuesday, soaring 268.63 percent by noon to HK$0.94 ($0.12).

The company trading in Hong Kong closed up 183.33 percent to HK$0.255 on Monday, hitting an intraday high of HK$0.4 per share after Lai was arrested for violating the national security law of Hong Kong for colluding with foreign powers.

Yesterday saw the company's market capitalization skyrocket to HK$670 million from HK$200 million, while the value of stakes taken by Lai also increased sharply to HK$480 million from HK$140 million.

Although some of Lai's supporters posted on Facebook that they bought Next Digital's shares to show confidence in the company's future prospects, the information they disclosed showed that those people accounted for only a tiny portion of the total transactions.

For example, a Hong Kong-based finance column writer named "HunshuicaijingChannel" posted on Facebook that he bought 1.22 million Next Digital shares at the price of HK$0.078 per share, totaling about HK$95,000.

"Some political funding connected with Hong Kong separatists may be behind the speculation of Next Digital, aiming to rapidly increase its fortune by manipulating the stock," Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Tuesday.

No reasonable investors would invest in a company whose controller has been arrested and may face severe criminal charges, which is of course usually a disaster for a company, Dong said, adding that any new investor hoodwinked into buying such junk stocks would eventually find themselves losing out.

However, some observers noted that the company's rise in stock price could also be due to genuine speculation over Next Digital's future. Lai's arrest could be seen as good news for those investors who plan to increase their holdings in the company at a low price with the expectation that Next Digital could be acquired as a shell company, an analyst who preferred to be unnamed told the Global Times.

Next Digital didn't disclose why its shares surge so much. It made a statement on Monday saying that the arrest of its executive directors "is not expected to have any material adverse impact on the daily operations of the group which have continued in the ordinary course."

Public information showed that Lai has a stake of 71.26 percent in Next Digital, with only 757 million shares in circulation. According to financial results released by Next Digital, the company posted a loss of HK$415 million in 2019.

Global Times