The market value fell by 80%, what happened to the amethyst storage that Wang Sicong bet on?

After the listing of Amethyst Storage, the business model is frequently changed, the large advance payment cannot be verified by the audit institution, and the "big change" of the main customers has triggered continuous market doubts

Wen | Reporter Wang Ying of Caijing

Editor| Wang Lifeng

Amethyst Storage (688086. SH) is on the table again.

On the evening of February 11, Amethyst Storage announced that the China Securities Regulatory Commission decided to file a case investigation against the company due to suspected violations of laws and regulations on information disclosure. This is less than two years since the company landed on the science and technology innovation board. Amethyst Storage is also the first listed company to be investigated since the opening of the Science and Technology Innovation Board.

Affected by this news, Amethyst Storage quickly fell to a stop with a 20% decline after the opening of the 14th, fell 7.77% again on the 15th, and as of the close of the 16th, it closed at 14.15 yuan / share, a new low after listing, with a total market value of about 2.7 billion yuan.

Although the company did not explain the specific matters involved in the violation of the letter in the announcement, the market generally believes that it may be related to the information disclosure of the company's 2020 annual report.

Founded in April 2010, Amethyst Storage is mainly engaged in optical storage media, optical storage devices, and intelligent hierarchical data storage and information technology solutions based on optical storage technology. The company was listed on the New Third Board in 2016, delisted in 2018, and was first listed on the Science and Technology Innovation Board in February 2020.

However, in the annual report of the first year of listing, Amethyst Storage was issued a qualified opinion by the audit agency. Since then, the SSE has repeatedly sent letters inquiries on the authenticity of large advance payments, changes in business models, and frequent changes in key customers.

In terms of performance, Amethyst Storage has declined for two consecutive years since its listing in 2020. In 2020, the company's net profit decreased by 24.71% year-on-year. In 2021, it is expected to achieve a net profit attributable to shareholders of listed companies of 6.5 million yuan to 9.75 million yuan, a year-on-year decrease of 93.74% to 90.6%.

"Changing face" is not only the operating performance, but also the secondary market stock price. Since the middle of July 2020, the share price of Amethyst Storage has fallen sharply, and the company's stock price has fallen to a halt on the date of the release of the annual report on April 30, 2021, and the current stock price of 14.15 yuan / share has fallen below the issue price of 21.49 yuan / share.

The value is concerned that almost all of the top ten circulating shareholders of AMEthyst Storage are investment companies, including many well-known venture capital institutions such as Dachen Venture Capital, Wang Sicong's Pulse Assets, and Shanghai Orient Securities Capital Investment Co., Ltd. (hereinafter referred to as "Orient Securities Capital Investment"). This is curious, why do these institutions look at amethyst storage? The company's stock price fell, how much will the income of the investment institution shrink?

Wind data shows that six of the top ten circulating shareholders of Amethyst Storage reduced their shares in the first three quarters of 2021. Since 2021, Dachen has reduced its stake by about 2.93% and plans to reduce its holding by another 1%. Two major private equity funds, in which Orient Securities Capital Investments is the general partner, plan to reduce their holdings by 2%.

After the listing, "performance changes face"

After the listing of Amethyst Storage, the business model has undergone major changes and the performance has also declined significantly.

According to the 2020 annual report, Amethyst Storage achieved revenue of 563 million yuan, an increase of 8.97% year-on-year, and net profit of 104 million yuan, a year-on-year decrease of 24.71%. This annual report was issued a qualified opinion by Fong's accounting firm, becoming the first non-standard annual report of the Science and Technology Innovation Board. The reservations relate primarily to the issue of prepaid technology development fees and the recoverability of prepaid equipment and accounts receivable.

At the end of 2020, the company's advance payment reached 136 million yuan, a surge of 253% year-on-year, including 78.2344 million yuan of technology development expenses. At the same time, accounts receivable for more than one year accounted for up to 41%. The auditors were of the view that it was not possible to obtain sufficient and appropriate audit evidence on the commercial substance of the advance payments and the recoverability of the receivables.

In response to the inquiry letter, Amethyst said that the development of the aforementioned prepaid technology involved nine suppliers, all of which were first-time cooperation, and that they were paid in full on an acceptance draft, and that there were multiple affiliations among the nine suppliers.

Is it not prudent to prepay the full amount to the supplier for the first cooperation?

The SSE asked the company to explain "the reason for the large advance payment to the supplier in the absence of sales revenue", and Amethyst Storage explained that it was in order to implement the cooperation as soon as possible, so it paid 100% of the advance payment in advance, but until March 2021, the two major projects still did not make clear progress, and the new cooperation was ultimately frustrated.

Entering 2021, the performance of Amethyst Storage has dropped significantly. According to the performance forecast, the company is expected to achieve a net profit of 6.5 million yuan to 9.75 million yuan in 2021, a year-on-year decrease of 97.2764 million yuan to 94.0264 million yuan.

As for the reasons for the decline, the company said that the main reason is that the business model has changed, and the superimposed new model business has not yet formed service revenue during the construction period.

The change in customers brought about by the change in business model is another major point of doubt for regulators.

Before the listing, Amethyst Storage's customers were mainly end customers such as system integrators, third-party data center operators, and telecom operators. After the listing, the company transforms into a project company through the establishment of shareholding or holding shares, and then through the project company or its affiliates to carry out specific business. In other words, some of the participating companies become customers and are related to each other. This essentially has the potential to amplify performance through related party transactions.

At the end of 2020, three of the top five debtors of accounts receivable were related parties to Amethyst Storage, including Beijing Zhonghong Wisdom Technology Co., Ltd., Shanxi Amethyst Tianzhong Technology Co., Ltd., and Hunan Shulian Zichen Information Technology Co., Ltd. The latter two companies also have the same shareholder, Guangzhou Dahao Enterprise Management Co., Ltd.

Entering 2021, Amethyst Storage's main customers have changed again. The company said in the reply to the inquiry of the 2021 semi-annual report that the top five customers in the first half of the year were also the first transaction cooperation.

Changes in business models and large customers directly lead to some accounts receivable becoming bad debts. One of the reasons for the pre-loss in 2021 is to make a 100% bad debt provision for 28.41 million yuan of accounts receivable of Shenzhen Yuwei Shitong Technology Co., Ltd.

Frequently reduced by venture capital institutions

As early as 2017, before the listing of Amethyst Storage, the top ten shareholders flashed the figure of Dachen and "national husband" Wang Sicong.

In June 2017, Amethyst Storage issued an additional 164 million yuan to Dachen Venture Capital, Pulse Capital, Cornerstone Capital, etc., with a subscription price of 7.1 yuan per share. Among them, Tianjin Pulse No. 1 Asset Management Partnership (Limited Partnership) (hereinafter referred to as "Tianjin Pulse"), a subsidiary of Wang Sicong, subscribed for 7.0423 million shares, with a total investment of about 50 million yuan, ranking the fourth largest shareholder with a share of 5.92%.

In the public perception, Wang Sicong's investment is more concentrated in the pan-entertainment industry, such as media, games, etc., the most well-known of which are the IG team and Panda Live. But in fact, In fact, Wang Sicong invested in many electronic technology and other manufacturing enterprises on the New Third Board in his early years, such as Hexin Ruitong, Tianhao Electronics, McKai Intelligent Manufacturing, Amethyst Storage, etc., each with an amount of tens of millions of dollars, with a total investment of nearly 200 million yuan. However, the above four companies have submitted delisting applications and withdrawn from the New Third Board.

In addition to Wang Sicong, another star investment institution that entered the market is the Dachen Investment Department under TV broadcast media. Amethyst Storage is the 7th listed company on the Science and Technology Innovation Board invested by Dachen.

In 2017, Shenzhen Dachen Chuanglian Equity Investment Fund Partnership (Limited Partnership) (hereinafter referred to as "Dachen Chuanglian") subscribed for 10.5518 million shares of Amethyst Storage through a fixed increase, accounting for 8.87% of the total share capital. Another private equity investment fund under the Dachen Department, Shenzhen Dachen Chuangtong Equity Investment Enterprise (Limited Partnership) (hereinafter referred to as "Dachen Chuangtong"), entered Amethyst Storage in November 2018 at a capital increase price of 9.665 yuan and held 5.1733 million shares.

According to this calculation, Dachen Has invested about 125 million yuan in amethyst storage.

After three years of dormancy, investment institutions finally waited for the day when Amethyst Storage was listed. On February 26, 2020, Amethyst Storage, which was issued at 21.49 yuan, closed at 77.49 yuan, an increase of 264.08%.

After the listing and issuance, Dachen Chuangtong and Dachenchuang jointly held 8.26% of the shares of Amethyst Storage, and Tianjin Pulse held 3.7% of the shares. If calculated according to this closing price, the market value of Dachen's shareholdings exceeds 1.2 billion yuan, and the investment income exceeds 1 billion yuan; the investment income of Tianjin Pulse is nearly five "small targets".

But for venture capital companies, this is just a floating profit, because there is still a one-year lock-up period that cannot be sold and realized, and there is still uncertainty about future earnings. In any case, when the target company will exit after listing is still the first priority.

After the restriction period passed, Amethyst Storage was repeatedly reduced by the Dachen System. In March 2021, Dachen Chuanglian, which holds 5.5425% of the shares, announced that it intends to reduce its holdings by no more than 2%. On September 27, the reduction was completed, and the Dachen system reduced its holdings by about 1.93%, with a price range of 19.88-28.29 yuan and 81.505 million yuan.

Just over half a month after the reduction, Dachen Chuanglian once again announced a plan to reduce its holdings, and intends to continue to reduce its holdings by no more than 2% of the total number of shares in the company. On January 28, Dachen Chuanglian has completed a 1% reduction in cash, cashing out 41.99 million yuan. At this point, the Dachen department basically recovered its previous investment.

At this time, Dachen Chuanglian and its consistent actor Dachen Chuangtong are no longer shareholders holding more than 5% of the shares, and the total shareholding of the two is only 4.53%.

Since the lifting of the ban on February 26, 2021, the stock price of Amethyst Storage has been cut, which has directly led to a significant reduction in the investment income of venture capital institutions. If we simply estimate the closing price of 14.24 yuan on February 15, the investment of Dachen Department has a return on investment of about 97.22% in about five years.

Tianjin Pulse also reduced its stake in Amethyst Storage twice in 2021, from 7.0423 million shares to 4.9885 million shares in the first quarter of 2021, and to 3.0847 million shares in the third quarter. Since Tianjin Pulse is not a shareholder of more than 5%, the price and amount of its reduction have not been disclosed. If estimated according to the average price of the range transaction, Wang Sicong's two reductions totaled 115 million yuan, plus the current market value of the position, the five-year return on investment is about 219%.

More venture capital institutions are gradually reducing their holdings.

On January 4, 2022, the two major venture capital institutions under Orient Securities also announced their plans to reduce their holdings. Haining Dongzheng Hande Investment Partnership (Limited Partnership) (hereinafter referred to as "Dongzheng Hande") and Ningbo Meishan Bonded Port Area Dongzheng Xiade Investment Partnership (Limited Partnership) (hereinafter referred to as "Dongzheng Xiade") intend to reduce their holdings by no more than 2% of the total number of shares in the Company.

Orient Securities Hand and Orient Securities Hand are both private equity investment funds managed by Shanghai Orient Securities Capital Investment Co., Ltd. as general partners and are acting in concert, with a total shareholding of 5.43%.