SHARES of Geely Automobile Holdings Ltd ((SEHK: 0175)), the listed unit of China's largest privately owned car maker, fell yesterday after it agreed to sell stock to its controlling shareholder at a discount to buy stakes in car making ventures.

The stock dropped 6.9 percent to HK$1.36 (17 US cents) in Hong Kong after earlier plunging as much as 11 percent. The shares resumed trading yesterday after being halted last Wednesday before an announcement.

Geely will sell 1.29 billion new shares at HK$1.25 apiece to Li Shufu to buy stakes in five ventures, it said on Friday. That's a 14-percent discount to the closing price last Wednesday.

"The existing shareholders may be hurt due to dilution effect on earnings, but the deal is favorable to them because the purchase price is quite cheap," Alex Tam, a Hong Kong-based analyst at CSC Securities Ltd, told Bloomberg News. "I think it's getting a good balance here."

Geely, based in Hong Kong, makes Free Cruiser compact cars and other models through four ventures, all of which are indirectly controlled by Li. The fifth is due to begin production by the end of the year, Executive Director Lawrence Ang said on Friday.

The auto maker will pay HK$1.61 billion to Li to raise its stakes in the ventures to 91 percent from 46.8 percent.