Key Takeaways:
Duan Yongping's H&H International Investment cut its Pop Mart stake to 5.55% from 7.65% on July 30, after options contracts were assigned and expired.
"The puts expired, and some were called away," Duan said in an online post, confirming the reduction stemmed from options settlement rather than a deliberate sale in the secondary market.
The Hong Kong Exchange filing showed H&H International Investment reduced its long position by 27.933 million shares to roughly 73.9 million shares. The change was attributed to "delivery of shares or payments required under equity-linked derivative instruments." The net reduction in physical shares was about 8.93 million, delivered at a composite settlement price of approximately HK$162.50.
The move comes a week after Duan said on July 23 that he was "highly unlikely" to sell his Pop Mart shares within the next decade, having only recently begun building the position. Pop Mart closed at HK$161.40 on Aug. 5, up 0.75 percent, with a market value of HK$214.9 billion, down 12.49 percent this year. Short selling accounted for 23 percent of the day's turnover.
Duan, who has used similar options strategies on Apple, began accumulating Pop Mart in May, shifting his entire China Shenhua holding into the toy maker. He and H&H International Investment each added 9.82 million shares on May 25, lifting their combined stake to 5.69 percent and making them the company's second-largest shareholder. H&H increased its stake again on July 6, from 6.85 percent to 7.65 percent.
Duan has said he values Pop Mart founder Wang Ning's leadership and the strength of the company's business model. He noted Pop Mart generated RMB 13 billion in profit last year with a market capitalization of around HK$200 billion, and said he focuses on long-term prospects rather than short-term earnings swings. He has also said he is selling put options on Micron Technology, SpaceX, Tesla and Palantir as he works to understand the AI trade.
Selling covered calls against a long position is a strategy Duan has used to generate premium income, and the assignment of those contracts on July 30 triggered the delivery of shares at the agreed strike. The disclosed long position ratio also includes derivative-linked positions, so the percentage decline overstates the reduction in physical holdings.
The reduction does not reflect a change in Duan's long-term view, since it resulted from options settlement rather than active selling. Investors will watch whether H&H International Investment rebuilds its position above the 5 percent disclosure threshold in coming weeks.
This article is for informational purposes only and does not constitute investment advice.
