Shares in a Hong Kong-listed Chinese dairy crashed more than 90 percent Friday, in one of the city's biggest sell-offs that wiped billions from its market capitalisation.
China Huishan Dairy collapsed 91 percent in late morning trade before paring back marginally and heading into the break 85 percent down at HK$0.42.
Trading in the shares, which scratched about $4.1 billion off its market value, was suspended by the start of the afternoon session.
It was not initially clear what caused the sudden sell-off but Bloomberg News reported that hedge fund Muddy Waters had said in December the firm was "worth close to zero" and raised questions about its profitability.
The fund, created by short-seller Carson Block, said Huishan had been overstating how much it had spent on cow farms in order to "support the company’s income statement".
The dairy at the time called for a brief trading halt but dismissed the claims as groundless. It also said chairman Yang Kai had even built on his holdings in the firm, according to the Financial Times.
Until Friday, Huishan had enjoyed a relatively stable performance since its 2013 listing.
"This kind of volatility in individual stocks will alert investors of the potential risk about investing in private Chinese companies," Ben Kwong, executive director of KGI Asia Ltd in Hong Kong, told Bloomberg.
"Sharp volatility is sometimes related to margin calls from brokers so if they fail to settle margin calls there may be forced liquidation and that would increase selling pressure."
Margin trading, where investors use borrowed funds to buy stock, has become synonymous with volatile markets in China as it potentially generates bigger profits but also exposes traders to bigger losses.
It was behind a stock market boom that sent the Shanghai bourse up 150 percent in 12 months, before it plummeted in June 2015 after regulators moved to tighten rules on the practice.
Huishan has so far declined to comment.