Shares of JIA YAO HLDGS (01626) tumbled more than 25% during the closing session, last trading down 19.16% at HK$20.84 with turnover reaching HK$16.29 million.

The company recently announced plans to acquire an 80% stake in Hong Kong-based AI gaming firm Jiu Wan Li Technology for up to HK$430 million. Public filings show JIA YAO HLDGS primarily operates in the e-cigarette sector, while Jiu Wan Li focuses on AI-powered gaming, with its flagship product being the idol-training casual simulation game "Idol Empire."

According to the announcement, Jiu Wan Li Technology reported a net profit of only RMB 310,000 for fiscal 2025. Based on the HK$430 million purchase price for an 80% stake, the implied total valuation reaches approximately HK$540 million, translating to a price-to-earnings ratio exceeding 1,700 times.

Notably, the seller has committed to a net profit of no less than HK$50 million in 2026. Should actual earnings fall short of this target, the number of consideration shares ultimately receivable by the seller will be correspondingly reduced.