The Situation

Futu Holdings Ltd (NASDAQ: FUTU) shares – a holding company in digitized brokerage and wealth management platform internationally, with Tencent being its largest investor as of 2019 – plunged on Friday after reports from China's securities regulators regarding unlawful securities businesses being conducted. As of 1:00 PM ET, Futu shares dropped by 31.20%.

The Explanation

Futu Holdings Ltd fell under scrutiny from China's securities regulator after the latter said that both Futu Holding and UP Fintech Holding had done unlawful securities business. The company will reportedly be banned from opening new accounts from investors from mainland China.

The company's situation came over a year after Chinese official media issued warnings that Futu and UP Fintech did not have licenses in China and faced regulatory risks. Earlier reports said Chinese officials wanted to ban the company from offering offshore trading services to mainland clients.

The company is backed by Tencent Holdings, an investor in other companies like Discord Inc., WeChat, Roblox, and other ventures.

See the $FUTU chart performance here.

The Effect

Futu Holdings Ltd stocks reportedly plunged upon the news from Chinese regulators. The investors' reaction happened as the company is now in legal limbo.

Since investors can't know for sure whether the company can bounce back after the company banned them from opening new investor accounts for mainland China, it is more important to wait until more clarity is given regarding the situation.

See full $FUTU flow at: https://unusualwhales.com/stock/FUTU/flow-overview