SHANGHAI -- Hong Kong-listed Future Land Development Holdings, one of China's biggest property developers, has named a new chairman after its billionaire founder was arrested for alleged sexual assault on Wednesday, prompting the company's shares to plummet.
The Shanghai-based company -- which is known in the mainland under its new name, Seazen Holdings -- did not disclose the nature of the case against Wang Zhenhua except to say it was personal and "not related to the operations of the group." The new chairman is Wang's son, Xiaosong, aged 31.
In its reports about the case, state newspaper People's Daily cited a Shanghai police report about the arrest of a man named Wang over the alleged sexual assault of a young child.
Wang, the controlling shareholder of China's eighth-largest developer, has an estimated net worth of 17 billion yuan ($2.47 billion), according to Forbes China. He also controls Hong Kong-listed property management affiliate S-Enjoy Service Group. He could not be reached for comment.
Shares of Wang's companies began tumbling Wednesday afternoon in Hong Kong, which stays open later than Shanghai, as rumors of his arrest emerged. Future Land lost 31.9% over the two days, becoming the most traded stock in Hong Kong on Thursday, while S-Enjoy dropped 33.7% over the period. In Shanghai, Seazen fell by the maximum 10% limit Thursday before trading was suspended.
Founded in 1993 in Jiangsu Province abutting Shanghai, Seazen has developed both residential and commercial projects, establishing a presence in over 100 Chinese cities.
Analysts warned on Thursday about continuing downward pressure on the developer's share price, with Goldman Sachs noting a potential for "stock overhang." The U.S. investment bank has a "buy" rating on the stock due to its "strong presales growth momentum and uptick in mall rental growth."
Nomura, which also has a "buy" on Future Land, said it will review its target price. "We think the event could deeply damage the company's corporate governance track record and it may take a long time to rebuild investors' confidence."
The new chairman, Wang Xiaosong was already a board member and president of the group's marketing arm before his promotion. He joined the company in 2009 as a civil engineer after graduating from Nanjing University.
His father, who previously served as a deputy to the National People's Congress, China's legislature, was named a "National Model Worker" by the central government in 2010.
In China, the group is known for a corporate social responsibility project called "Seven Colors," which promotes education to youngsters from low-income families.
Wang's arrest comes almost a year after Richard Liu Qiangdong, founder and chairman of internet shopping service JD.com, was arrested in the U.S. over the alleged rape of a Chinese university student there. The arrest set off heated debate, which continues to swirl in China, over alleged sexual misconduct by corporate chieftains. U.S. prosecutors ultimately concluded they lacked sufficient evidence to charge Liu, but the alleged victim has filed a civil suit against him in the state of Minnesota.