With the boom in both AI and smart city infrastructure becoming a regular fixture in the day-to-day news cycle, the stationary battery industry, which was once a niche not many were familiar with, has become an integral component of global energy infrastructure. Indeed, stationary batteries underpin the integration of renewables into the energy infrastructure, grid stability, and the long-term duration of energy storage mechanisms. With the sector expanding rapidly on an almost daily basis, regulators have increasingly raised concerns regarding the fact that governance standards and disclosure practices have not evolved as quickly and comprehensively as the industry itself. Concerns of this nature have the tendency to move quite quickly from abstract regulatory guidance to concrete enforcement, particularly in instances where the concerns in question revolve around the integrity of representatives of senior management, questions of conduct related to procurement and allegations of unfair competition.
This regulatory inflection point is manifesting itself in real time in the case of Xiamen Hithium Energy Storage Technology Co., Ltd., a provider of lithium-ion battery energy storage solutions founded in 2019. Mr. Wu Zuyu, who serves as Chairman of Hithium, was formerly an employee of CATL, the world’s leading power battery manufacturer, with his departure seeing allegations that he both stole proprietary technology from CATL to found Hithium, and violated an NDA which would have prevented him from working on founding Hithium at a time when he claimed, in writing, to have been tending to family matters. These matters, which were not disclosed in Hithium’s recently lapsed A1 application for a listing on the Hong Kong Stock Exchange (HKEX), materially heighten Hithium’s governance, litigation, and disclosure risks and place the company within the category of issuers that regulators have warned must be scrutinised with particular care.
The Securities and Futures Commission (SFC) in Hong Kong has made clear, most recently in a January 2026 circular, that the significant uptick in IPO applications on the HKEX has seen the quality of disclosure in listing documents deteriorating significantly. Regulators expressed significant concern over deficiencies identified. These include failures to conduct adequate due diligence, incomplete responses to regulatory enquiries, and clear attempts to obscure or minimise significant risk factors. With Hithium’s A1 application lapsing around the same period that the circular refers to, it is difficult not to draw a connection between the two. In the case of Hithium, their lapsing application indeed fits with the SFC’s explicit warning that such conduct may constitute non-compliance with sponsors’ obligations and that vetting may be suspended, applications returned, or regulatory action taken where disclosure is misleading, incomplete, or overly generic.
Further concerns arise from the fact that CATL began legal proceedings before the Ningde Intermediate People’s Court against Mr. Wu regarding concerns that between 2016 and 2019, when he was employed at CATL, Mr. Wu engaged in bribery. According to the case, he specifically abused his position of authority in equipment procurement. According to filings, related improper benefits were concealed through equity arrangements involving relatives and intermediaries. Such actions enabled a non-approved supplier to gain access to CATL’s procurement system and secure contracts exceeding RMB 100 million. CATL alleges that this conduct caused significant economic losses and violated China’s Anti-Unfair Competition Law, seeking damages exceeding RMB 35 million in a case which has been accepted by the court and remains ongoing.
Considering Mr. Wu’s current position as Chairman of Hithium, the discussed misconduct in arenas central to the stationary battery industry constitutes an undisclosed material risk irrespective of the outcome of the case. Given the SFC’s repeated emphasis that the disclosure obligation should be triggered by credible allegations and ongoing proceedings, not by final judicial determinations, this is certainly a case which Hithium shareholders should be aware of.
The allegations, however, do not end there. CATL has further accused Mr. Wu and his company of both recruiting now former CATL employees as well as misappropriating CATL’s proprietary and confidential information, including commercially sensitive data. Such actions were clearly designed to accelerate Hithium’s development at CATL’s expense through exploiting illicit access to another’s intellectual property and human capital. Such activities naturally expose Hithium to further risks including additional litigation, injunctions, damages claims, and reputational harm, all the while raising serious questions regarding the company’s ethical standards.
Going back to the warnings coming out of the SFC and reputational concerns now facing HKEX, the SPC is expressly identifying such failures to disclose integrity and compliance related issues as examples of “bad disclosure”. In language which cannot be otherwise interpreted, the regulator warns sponsors and issuers not to rely on boilerplate risk language where company-specific issues exist, and that attempts to contextualise or downplay such matters may render disclosures misleading. In the case of Hithium, filing documents do not clearly articulate the severity of the ongoing case, their procedural status, and their potential impact on governance, operations, and reputation, nor do Hithium’s filings warn of the extent to which these issues may expose the company and its shareholders to significant regulatory challenge.
Regulators are taking a stand as such due diligence and gatekeeping failures appear to be turning into a systemic problem which is reflecting poorly on the exchange more broadly. HKEX, which was the number one exchange in 2025 in terms of capital raised, would certainly lose its appeal to other exchange competitors if investors do not feel that disclosures required by regulators are performative, rather than accurate, complete, and balanced. New threats from regulators that failures to disclose may result in vetting suspensions, thematic inspections, or disciplinary action against the sponsor and its principals showcase that these concerns are being raised among senior leadership at HKEX who are beginning to understand the need to immediately address such deficiencies.
Such cases will inevitably see regulatory tolerance further narrowing, with those seeking to raise capital becoming increasingly dependent on good governance, credibility and transparency rather than often empty growth narratives. The manner in which Hithium, its sponsors, and its advisers address the CATL litigation and related allegations in future disclosures will be closely watched by regulators as a test case for whether the industry is capable of meeting the SFC’s stated expectations on integrity, transparency, and accountability.
