On November 16, 2023, China Nuclear Titanium Dioxide at the China International Coatings, Inks and Adhesives Exhibition. Visual China / Figure
At about 19 o'clock on April 12, 2024, China Nuclear Titanium Dioxide (002145. SZ) announced that Wang Zelong, the actual controller, was filed by the China Securities Regulatory Commission on March 13 on suspicion of violating restrictive provisions to transfer the non-public issuance of shares of China Nuclear Titanium Dioxide in 2023 and illegal information disclosure.
In the afternoon of the same day, the new "National Nine Articles" were just released, proposing to strengthen the responsibility of the whole chain of issuance and listing, and further consolidate the first responsibility of issuers and the "gatekeeper" responsibility of intermediaries.
China Nuclear Titanium Dioxide became the first listed company to be filed after the new "National Nine Articles", and it fell to the limit after the opening of the market on April 15. Not only that, CITIC Securities (600030. SH), which was approved by Haitong Securities (600837.SH), was also filed by the China Securities Regulatory Commission on the same day.
The reasons for the filing of the case by the three parties all point to the private placement initiated by CNNC Titanium Dioxide in February 2023.
This fixed increase was first due to CNNC's titanium dioxide's large-scale entry into new energy in 2021. According to incomplete statistics, the company threw out an investment plan of nearly 30 billion yuan that year, and at the end of 2020, the total assets of China Nuclear Titanium Dioxide were only 8.175 billion yuan.
On May 25, 2021, China Nuclear Titanium Dioxide announced a fixed increase plan, planning to raise 7.091 billion yuan to invest in three new projects and replenish liquidity. On February 23, 2023, the private placement was completed, and the total amount of funds raised decreased to 5.288 billion yuan.
In the end, 16 investors participated in the subscription, and the lineup was quite luxurious. Including UBS AG, CICC, Huatai Securities, Everbright Securities, Haitong Securities, Guotai Junan Securities and other well-known institutions, central enterprise rural industry investment fund, Gansu Great Wall Xinglong Silk Road Fund, underdeveloped areas industrial development fund and other state-owned funds, Shanghai Youyou Wealth Investment, Wells Fargo Fund, Golden Eagle Fund, Caitong Fund, Nord Fund and other public and private offerings, as well as Niu San, Guo Weisong, Wei Wei.
However, participating in this private placement has caused many investors to suffer heavy losses. They suspect that this is a case in which a listed company withdraws the loan bond source before the private placement through an employee stock ownership plan to raise the stock price and form a higher benchmark price for the private placement. After the completion of the private placement, it is a rare operation to lend a large number of securities through the employee stock ownership plan and lock the bonds (locked for specific customers in order to realize the exclusive use of special bonds), resulting in a decline in the stock price.
"If you tell me that the major shareholder has initiated a private placement and has borrowed securities to sell short, what else will I buy?" said a person in charge of an investment institution from Shanghai could not contain his anger.
Additional issuance of the top grid
Founded in 1989, the predecessor of the titanium dioxide branch of China Nuclear 404 was listed on the Shenzhen Stock Exchange in 2007, and its main products are titanium dioxide known as "industrial monosodium glutamate", which is widely used in coatings, plastics, rubber, inks, papermaking and other fields.
In 2012, China Nuclear Titanium Dioxide completed bankruptcy reorganization by issuing shares to acquire Anhui Jinxing Titanium Dioxide (Group) Co., Ltd., and the nature of the enterprise was changed to a private enterprise, with Li Jianfeng, then chairman of Jinxing Titanium Dioxide, holding 31.71% of the shares.
At the end of 2019, Wang Zelong bought China Nuclear Titanium Dioxide from the original shareholders for 1.6 billion yuan, and he was only 23 years old when he became the owner. According to the identity information released by the listed company, he was born in 1996, is a native of Zhuzhou, Hunan, and his residence and mailing address are located in Beijiao Town, Shunde District, Foshan City, Guangdong Province, and he has the right of permanent residence in Hong Kong. At the age of 20, Wang Zelong became a lomon Baili (002601. SZ), which has now exited and is reaping handsome returns.
Through these two capital operations, in 2021, 24-year-old Wang Zelong will be on the Forbes list of the world's youngest billionaires, ranking second in the world and first in China with $1.5 billion.
In an exclusive interview with Forbes, he said that investing in Lomon Baili was the first major financial investment decision made under the instruction of his father Wang Deliang. Wang Deliang was engaged in chemical trade in his early years and dug his first pot of gold.
The two investors and a lawyer who participated in the private placement both told Southern Weekend that the person who talked to them on phone, WeChat, and in person about the private placement and follow-up matters has not been Wang Zelong, but Wang Deliang.
As early as 2000, Wang Deliang used Guangzhou Zhongkexin Group Co., Ltd. (hereinafter referred to as Zhongkexin Group) as a platform to frequently participate in and control a number of listed companies, many of which are state-owned enterprises.
In 2003, Zhongkexin Group became the owner of Chinatungsten High-tech (000657. SZ), Wang Deliang was born in 1970, is a native of Jieyang, Guangdong, and his address is located in Beijiao Town, Shunde City, Guangdong Province, like Wang Zelong.
In 2014, Wang Deliang and natural person Zhang Ben jointly initiated the establishment of Jiaolong Asset Management, and later dominated the capital market with the Jiaolong system, and in 2017, he was suspected of sitting in the bank and manipulating Guangzhou Automobile Group (601238. SH) share price, Jiaolong Asset Management was publicly punished by the Guangdong Securities Regulatory Bureau. After that, Wang Deliang disappeared from the capital market.
However, whether Wang Zelong's father is Wang Deliang of the Jiaolong family has not yet been disclosed by the listed company.
After Wang Zelong became the owner of CNNC titanium dioxide, the chemical company entered new energy in a big way, including lithium battery and new energy power generation. In 2022, CNNC Titanium Dioxide will achieve revenue of 5.481 billion yuan and net profit of 643 million yuan, a year-on-year decrease of 47.2%.
In August of the same year, the fixed increase plan of China Nuclear Titanium Dioxide was approved by the China Securities Regulatory Commission, and the non-public issuance of no more than 893 million new shares raised raised 5.288 billion yuan. Before the private placement, the company's total share capital was 2.978 billion shares, and the number of shares issued this time was about 29.995% of the pre-issuance share capital, and the number of shares issued was close to the red line of no more than 30% of the listed company's private placement.
Such a fixed increase ratio is relatively rare in private enterprises, and the top-level issuance means that the shares of major shareholders will be diluted.
The benchmark date for private placement pricing is February 8, 2023, and the issue price is not less than 80% of the average trading price of the company's shares in the 20 trading days before the pricing benchmark date, that is, 5.92 yuan per share.
On the opening day of February 8, the intraday share price of China Nuclear Titanium Dioxide once reached 7.95 yuan / share, which made a person in charge of an investment institution participating in the private placement satisfied, "The difference (with the private placement) is rarely close to 40%, and we have used quantitative models to count many times, and such a difference in history will generally not be lost."
In fact, in the 20 trading days before the pricing benchmark date, that is, from January 4, 2023 to February 7, 2023, the share price of CNNC titanium dioxide rose by 26.39%, while the broader market rose by only 7.28% during the same period.
Regarding the rally before the private placement, an investor only said, "The market is ever-changing, and we really didn't expect the development later."
Haitong Securities has obtained a formula for the fixed increase of titanium dioxide for CNNC. Visual China / Figure
It fell sharply after the fixed increase
On February 13, 2023, the issuers subscribed in full according to the payment notice. It was from this day that China Nuclear Titanium Dioxide stock fell for five consecutive years, from 8.03 yuan / share to 7.39 yuan / share, a decline of more than 9%.
Investors further compared the stock price trends of the Shenzhen Stock Exchange Component Index and the titanium dioxide industry in the same period, and believed that from the fundamentals to the industry, there is no reason for the collapse of CNNC titanium dioxide.
"Before the private placement, the nuclear titanium dioxide outperformed the market, the leader, and the industry, but as soon as the fixed increase ended, it immediately underperformed the market, the leader, and the industry. An insider close to the private placement said that the huge contrast before and after the private placement made these institutional investors realize that something was not quite right, and began to look for the data of China Nuclear Titanium Dioxide margin trading.
The refinancing securities data of CNNC titanium dioxide are divided into two parts: before and after the private placement.
According to the relevant data of China Securities Finance Co., Ltd. (hereinafter referred to as China Securities Finance) on refinancing securities transactions, on December 9, 2022, China Nuclear Titanium Dioxide once refinanced 15 million shares of shares, with a loan period of 28 days, that is, due for repayment on January 6, 2023. This repayment time almost coincides with the starting date of 20 trading days before the benchmark date of CNNC's titanium dioxide fixed increase, that is, January 4.
In addition, according to the content of CNNC Titanium Dioxide's 2022 annual report, as of the end of 2022, the total number of refinancing securities lent by the fourth and fifth phases of CNNC Titanium Dioxide's employee stock ownership plan was 15 million shares.
Securities lending business is a short-selling mechanism that sells securities at a high price and then buys them back at a low price. If investors want to short, they can borrow securities from brokers, but the source of securities from brokerages is limited, so refinancing bonds appear.
As the counterparty of securities lending transactions, CSFC is the only financial institution engaged in refinancing business in China, which borrows securities from lenders such as shareholders of listed companies and then lends them to securities firms.
Therefore, the higher the margin of a stock, the higher the bearish position, and the higher the probability of the stock falling. Conversely, the lower the margin of a stock, the fewer opportunities there are to borrow and lend shorts.
Investors believe that before the private placement, China Nuclear Titanium Dioxide brought about a rise in stock prices by recovering the 15 million shares lent by the source of bonds, "forming a higher benchmark price for private placement".
According to the detailed data of CNNC titanium dioxide margin trading, on February 7, 2023, the company's securities lending balance was 430,000 shares, and on this day, the joint lead underwriter sent the "Subscription Invitation" and "Subscription Quotation" to investors. On February 10, the balance of CNNC's titanium dioxide securities lending was 1.283 million shares, and the subscription quotations of each non-public offering object were completed on the same day.
On February 13, the issuers subscribed in full, and the balance of nuclear titanium dioxide was 2.578 million shares on this day, but the next day, the balance of nuclear titanium dioxide securities suddenly soared to 28.2 million shares, and continued to increase sharply in the next few days, and by February 17, the balance of China Nuclear Titanium Dioxide was as high as 85.54 million shares.
Why is there a sudden surge in so many sources in the market?
According to CSI data, on February 6 and February 9, 2023, a total of 88,023,200 shares of CNNC Titanium Dioxide were refinanced in the two trading days. In addition, according to the financial report of China Nuclear Titanium Dioxide for the first half of 2023, as of June 2023, the total number of refinancing securities lent by the fourth and fifth phases of China Nuclear Titanium Dioxide's employee stock ownership plan is 88 million shares.
In the face of a considerable amount of data, investors believe that CNNC Titanium Dioxide has lent a large number of refinancing securities through the employee stock ownership plan, resulting in a surge in market securities sources, which has a direct impact on the continuous decline of CNNC Titanium Dioxide's share price.
What's even more surprising is that the two investors said that the share price of China Nuclear Titanium Dioxide continued to fall, and they had tried to hedge against securities lending, but found that the source of securities was locked and could not be borrowed at all, and they suspected that a related party of a listed company had borrowed the source of bonds.
CITIC Securities, as the sponsor and joint lead underwriter of CNNC titanium dioxide, was investigated by the CSRC. Visual China / Figure
"Fixed increase + securities lending" arbitrage?
The lock-up period of the fixed increase is half a year, and the ban will be lifted on September 20, 2023, and the share price of CNNC titanium dioxide has fallen sharply. During the period from February to September, the cumulative decline of China Nuclear Titanium Dioxide reached 45.58%, and the overall market fell by 15.63% in the same period.
"Lose 30%. Some investors said, while others said, "It's about 20% of the loss." ”
They told Southern Weekend that they had held talks with Wang Deliang about the controversy over the fixed increase, but there was no substantive progress. One investor once told Mr. Wang via WeChat that he would take action, and Mr. Wang sent him a happy holiday meme the next day.
In mid-October, investors began to report to the China Securities Regulatory Commission (CSRC) on the grounds that major shareholders had manipulated stock prices, set up money to make money, and deceived investors. However, the investor could not provide evidence that CNNC's operation of titanium dioxide violated the relevant regulations on refinancing securities.
After seeing the CSRC's notice of filing a case against China Nuclear Titanium Dioxide, investors analyzed it word by word. In response to the "suspected violation of restrictive provisions to transfer the non-public issuance of shares of China Nuclear Titanium Dioxide in 2023", some people asked, "Wang Zelong is not the subscriber of the private placement, how can he transfer it in violation of regulations?"
Mao Xiaojian, a senior partner at Xinghan Law Firm, told Southern Weekend that Wang Zelong was placed on file for violating restrictive regulations in transferring non-public shares, indicating that Wang Zelong may have instigated, collaborated or helped others illegally transfer subscribed shares.
Some investors analyzed to the Southern Weekend reporter that in addition to the loss-making private placement participants, there may also be some institutions participating in the private placement, before and after the private placement, lending to listed companies a bond source equivalent to the size of the private placement, when other private placement parties are locked, they can still sell the stock at a relatively high point of the stock price to make a profit, and return the coupon source after the discount shares subscribed for by the additional issuance are lifted, "without any impact costs, and there is no loss of money".
After the lifting of the ban on private placement, the margin of securities lending of CNNC titanium dioxide quickly dropped to 3.145 million shares. CNNC Titanium Dioxide disclosed in the third quarter report of 2023 that the total number of refinancing securities lent in the fourth and fifth phases of the employee stock ownership plan was 88 million shares, which had been fully recovered by the end of the reporting period.
Almost at the same time as investors' reports, the China Securities Regulatory Commission plugged the risk-free arbitrage loophole of "fixed increase + securities lending". On October 14, 2023, the China Securities Regulatory Commission (CSRC) issued the "Optimization of the Relevant System for Securities Lending and Lending", which cancelled the lending of securities by senior executives and core employees of listed companies through special asset management plans established by participating in placing.
On the same day, the Shanghai and Shenzhen Stock Exchanges also issued a notice on optimizing the relevant arrangements for securities lending transactions and refinancing securities lending transactions, which clarified that if an investor holds restricted shares or strategic placement shares of a listed company, as well as shares subject to transfer restrictions such as the reduction of shares by major shareholders or specific shareholders transferred by way of block trading, the investor and its affiliates shall not sell the shares of the listed company through securities lending and borrowing during the restriction period.
It is worth noting that Wang Zelong's private placement subscribed in 2020 was lifted on October 17, 2023 and listed for circulation, and since then, the unrestricted shares he holds account for 33.45% of the total share capital, which is consistent with the number of shares held by Wang Zelong in the third quarter of 2023. In other words, all the stocks in Wang Zelong's hands may have been lifted.
However, Wang Zelong issued a "letter of commitment not to reduce holdings" a few days before the lifting of the ban, promising that within 6 months (that is, from October 13, 2023 to April 12, 2024), when the stock price is less than 13 yuan, he will not reduce his holdings through centralized bidding or block trading in the secondary market.
At the same time, Haitong Securities, CITIC Securities and CITIC Securities Capital, a wholly-owned subsidiary of CITIC Securities, also received the notice of filing.
Among them, Haitong Securities spent 547 million yuan to subscribe for 92,398,600 shares, ranking third in terms of subscription amount. After the completion of the private placement, Haitong Securities held 2.39% of the shares of CNNC Titanium Dioxide, and once ranked as the fourth largest shareholder of CNNC Titanium Dioxide.
CITIC Securities, as the sponsor (joint lead underwriter), was newly promoted to become the eighth largest circulating shareholder of CNNC Titanium Dioxide in the fourth quarter of 2022, with a shareholding ratio of 0.54%, and soon withdrew from the list of the top ten circulating shareholders in the first quarter of 2023.
According to the announcement issued by CITIC Securities and Haitong Securities, they are suspected of violating laws and regulations in the process of transferring the non-public issuance of shares of China Nuclear Titanium Dioxide in 2023 due to the violation of restrictive provisions by relevant entities.
CNNC's titanium dioxide investor relations phone has been in a state of inability to answer. Southern Weekend sent a question to Wang Deliang via WeChat, but as of press time, there has been no reply.
Southern Weekly reporter Mei Ling
Editor-in-charge: Feng Ye