Shares of Guotai Junan International Holdings (GJIH) plummeted 12.31% on October 10, 2024, as investors reacted to the announced merger terms between its parent company, Guotai Junan Securities, and rival brokerage Haitong Securities.

According to the merger agreement, each Haitong share will be exchanged for 0.62 Guotai Junan shares, applying to both the Hong Kong-listed H shares and mainland-listed A shares. The combined entity will also raise up to 10 billion yuan ($1.42 billion) by issuing new A shares to its controlling shareholder, Shanghai State-owned Assets Management.

The merger terms have raised concerns among Guotai Junan's Hong Kong shareholders, who fear significant dilution of their holdings in the enlarged company. This dilution risk, along with uncertainty surrounding the integration process, appears to have triggered a sell-off in GJIH's shares, leading to the steep decline on October 10.