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Xiaomi’s share price plunged 12% on the Hong Kong stock exchange Wednesday after the Chinese smartphone maker was forced to place a temporary hold on trading because it failed to disclose plans for a $4 billion off-market bond and stock sale.
The Hong Kong stock exchange requires companies to halt trading if inside information is made public before an official disclosure is released. Bloomberg first reported the $4 billion private sale on Tuesday, prior to any announcement from Xiaomi, which necessitated the trading halt. In the offering, Xiaomi issued 1 billion additional shares to institutional investors off-market, raising $3.1 billion; the company carried out a $855 million convertible bond sale at the same time.
Xiaomi sold the shares at a 9.4% discount on the company’s closing price on Tuesday. When the share price dropped 12% once trading resumed, it likely was a matter of investors correcting to the unofficial price. Still, the plunge was Xiaomi’s largest intraday trading loss since its IPO in 2018.
Xiaomi did not immediately return Fortune‘s request for comment.
Xiaomi’s shares had surged this year, rising 143% from January through to Tuesday, making Xiaomi Hong Kong’s best-performing stock of 2020.
The rally followed a rough patch for the 10-year-old Chinese phone maker. It priced its IPO in June 2018 at the bottom of an expected range, and shares tanked 55% over the following 12 months. Investors finally warmed to Xiaomi when its rival, Huawei Technologies, faced crippling U.S. sanctions.
Washington views Huawei—which makes telecom network equipment alongside smartphones—as a threat to national security, claiming the privately held company could use future 5G networks to siphon sensitive data to Beijing. To combat that threat, the Trump administration placed export controls on Huawei this year, forbidding companies from selling U.S.-made semiconductor equipment to the Chinese manufacturer.
Those and other U.S-led restrictions put pressure on Huawei’s smartphone shipments, which dropped by 15.1 million units in the third quarter of the year. Xiaomi’s global shipments rose nearly as much as consumers, concerned about Huawei’s future, switched to the cheaper Chinese smartphone maker.
In Europe—Huawei’s biggest overseas market—Huawei shipments dipped 25% while Xiaomi’s rose 88%. Xiaomi is now the second most popular brand in Italy, third in France, fourth in Germany, and has been Spain’s preferred smartphone brand for three quarters. According to industry tracker Canalys, Xiaomi also rose to replace Apple as the world’s third most popular smartphone brand in the third quarter.
Xiaomi already has a war chest of roughly $7 billion in cash and equivalents, but the company carries $11 billion in debt and interest repayments. The strong third-quarter results the company reported last week—revenue rose 35% over last year—are an opportunity to rally investor support as Xiaomi tries to capture more market share from rivals. In a filing to the Hong Kong stock exchange, Xiaomi said it will spend the $3.1 billion in share sales, in part, on efforts to “increase market share in key markets.”
