Regulatory News Sparks Speculative Rally

Sometimes all it takes is a regulatory announcement to send speculative stocks flying. On Dec. 15, China's Ministry of Industry and Information Technology approved market access for two Level 3 autonomous driving vehicles from the Deepal and Arcfox brands, clearing them for road tests in Chongqing and Beijing. The news ignited a buying frenzy in autonomous driving technology stocks, and Minieye Technology Co. Ltd. (2431.HK) surged nearly 50% in just four trading days.

For Minieye shareholders, the rally was a welcome relief after a brutal stretch. But it's also the latest chapter in what's been an absolutely wild ride since the company's IPO in December 2024.

A Roller Coaster First Year

Minieye priced its shares at HK$17 just over a year ago. The stock rapidly climbed to HK$39.50 by March last year, more than doubling from the IPO price. After that euphoric run, reality set in and the stock traded sideways at elevated levels through much of the year. Then came November, when anticipated selling by major investors after a lockup period was set to expire triggered a brutal selloff. The stock lost 60% of its value in a single month.

Only recently, riding the renewed enthusiasm for autonomous driving stocks, have Minieye's shares begun to recover. The company has also rolled out a series of measures designed to stabilize the stock price.

Lockup Extensions and Insider Buying

On Jan. 5, Minieye disclosed that major shareholders and several executive directors agreed to extend lockup periods for their holdings by 12 months. These lockups were originally set to expire on Dec. 17. The extension covers approximately 77.5 million shares, representing 18.4% of the company's total shares outstanding. Additionally, two individual shareholders collectively holding 10 million shares pledged to extend their lockup periods by six months.

Chairman Liu Guoqing also stepped up, purchasing 100,000 shares in the open market on Jan. 5 and Jan. 6 at an average price of HK$13.27. He spent about HK$1.33 million to acquire 0.02% of the company's issued shares. Separately, cornerstone investor Horizon Robotics bought another 690,000 shares in the open market.

Later that week, the company announced it had repurchased 3 million shares through Jan. 8 at an average price of HK$14.94 per share, spending HK$44.88 million ($3.5 million).

Can Support Measures Overcome Weak Fundamentals?

The question is whether support from major shareholders and corporate buybacks can put the stock back on a sustainable growth track. Maybe in the short term, given the current appetite for autonomous driving stocks. But ultimately, stock performance comes down to company fundamentals. And Minieye's financial picture shows no significant breakthrough.

The company's losses are widening, not narrowing. Its net loss grew from 130 million yuan ($18.6 million) in 2021 to 216 million yuan in 2024, with cumulative losses of 760 million yuan over those four years. In the first half of 2025, it lost another 152 million yuan, 40% wider than the year-ago period.

Minieye was refreshingly direct in its original listing documents, stating that its development plan and management's estimates did not include any expectation of becoming profitable before 2026. The red ink looks certain to continue for all of last year. And there are no signs yet that the company will finally turn profitable this year.

Frequent Capital Raises Raise Red Flags

Beyond the widening losses, some of Minieye's actions over the past year have damaged investor confidence. Last July, just six months after its listing, the company rushed to place 6.8 million shares at a steep 14.8% discount to the market price, selling them for HK$23.26 each to raise HK$155 million. Just four months later, it placed another 14 million shares at nearly a 10% discount, this time at HK$14.88 each, raising HK$204 million.

Two placements within a year of an IPO clearly signals that the company is burning through cash fast, and will likely continue tapping capital markets in the foreseeable future. That creates a constant overhang for the stock.

Investor Reversal Creates Trust Issues

Here's where things get interesting. One week before the first placement, cornerstone investor KCH International, which holds 31.09 million Minieye shares, pledged to extend its lockup period by three months from an original June 25 expiry date. It also committed not to sell more than 3.11 million shares in the nine months after the original lockup expiration.

But in August, the company disclosed that KCH International had revised its maximum planned disposal upward to 9.33 million shares due to "its own capital needs." The abrupt reversal angered investors, who questioned why KCH made commitments just days before the placement, only to reverse course a month later.

Auditor Switch Adds to Uncertainty

The wild ride doesn't end there. In July, the company abruptly announced it was changing auditors from PricewaterhouseCoopers to RSM Hong Kong, citing only a "comprehensive consideration of the company's current business operations and future audit service requirements." The sudden switch baffled investors, particularly given PwC's status as a global audit leader and the timing just six months after the IPO. The thinly explained change raised more questions than it answered.

Symbolic Gestures and Puzzling Timing

While the recent purchases by major shareholders signal confidence, the modest scale raises eyebrows. The chairman's purchase of 100,000 shares worth just over HK$1 million is mostly symbolic rather than substantive.

The company's HK$44.88 million share buyback announced last week raises further questions, coming barely a month after it raised HK$204 million through a placement. Particularly perplexing is the buyback's HK$14.94 average price, which is actually higher than the recent placement price of HK$14.88. That's the kind of capital allocation decision that prompts scrutiny of management's judgment.

More Potential Selling Pressure Ahead

Investors should be aware that KCH International could dispose of over 9 million shares before March this year, while lockups for individual and major shareholders will now expire in June and December, respectively. These create multiple potential overhangs for the stock. And given KCH International's precedent of reversing its previous commitments, there's no guarantee that other investors won't do the same when their lockup periods end.

For a company still deep in the red with no clear path to profitability, that's a lot of uncertainty to absorb.