Another brokerage "overturned" on the private placement project.
On the evening of April 16, Soochow Securities announced that the company was investigated by the China Securities Regulatory Commission for suspected failure to be diligent and conscientious in the sponsorship business of Gome Communications and Zixin Pharmaceutical's non-public issuance of shares. During the previous private placement period, the above two companies had financial fraud.
The reporter noted that Soochow Securities is the fourth brokerage company to be "named" by the regulator for the private placement project this month. Previously, CITIC Securities, Haitong Securities, and Huaxi Securities were all filed or severely punished for violations of private placement projects.
Interviewees believe that the new "National Nine Articles" emphasize the goal of strengthening supervision and building a high-quality capital market. Strengthening the supervision of securities firms, especially on private placement projects, is intended to improve the professionalism and compliance of relevant institutions.
Failure to fulfill responsibilities for private placement projects
The reporter learned that at present, Gome Communication has been changed to "ST Meixun" with a cap and faces the risk of delisting, while Zixin Pharmaceutical has been delisted by the Shenzhen Stock Exchange after becoming "*ST Zixin".
So, what happened to the two companies involved?
According to public information, Gome Communications used to be a well-known communication equipment company in the A-share market, and its main business was the research and development, manufacturing and sales of mobile terminal products.
Since 2018, Gome Communications has fallen into continuous losses, with a cumulative loss of more than 1.6 billion yuan in the past five years, including a loss of 77.815 million yuan in 2022. According to the Rules for the Listing of Stocks on the Shanghai Stock Exchange, after the release of the 2022 financial report, GOME Communications' shares were placed on other risk warnings and renamed as "ST Meixun".
On April 16, ST Meixun announced that the company received the "Prior Notice of Administrative Punishment and Market Prohibition" issued by the China Securities Regulatory Commission. According to the announcement, in 2020, ST Meixun inflated its revenue by 578 million yuan through false trade business, accounting for 61.53% of the year's revenue. The relevant documents of ST Meixun's 2020 non-public offering cited the above-mentioned false trading business revenue data, which was suspected of fraudulent issuance.
Another company involved, Zixin Pharmaceutical, was the former "Northeast Ginseng King". From 2018 to 2022, Zixin Pharmaceutical's operating income shrank from 1.325 billion yuan to only 144 million yuan, and its net profit increased from 1.74 yuan to a huge loss for three consecutive years.
In 2023, due to the audit report issued by the auditor on the financial statements of *ST Zixin in 2022 that cannot express an opinion, *ST Zixin will be subject to a delisting risk alert from May 5, 2023. Also since May 5, *ST Zixin's share price began to fall wildly, and finally the company's shares closed below 1 yuan for 20 consecutive trading days, and was terminated by the Shenzhen Stock Exchange on July 28, 2023.
According to Zixin Pharmaceutical's announcement on April 10 in the delisting sector, its financial fraud continued from 2013 to 2021. From 2013 to 2020, Zixin Pharmaceutical failed to disclose related party transactions as required, resulting in suspected major omissions in the company's annual report; from 2014 to 2021, the company was suspected of inflating the procurement cost of forest ginseng to inflate inventory; from 2017 to 2018, the company inflated operating income and profits through fraud, of which in 2017, it was suspected of inflating revenue by 94 million yuan and net profit of 85 million yuan, and in 2018, it was suspected of inflating revenue by 200 million yuan and inflating net profit by 95 million yuan.
As the sponsor of the private placement project of Gome Communications and Zixin Pharmaceutical, Soochow Securities failed to fulfill its duty of diligence and diligence in the process of performing its continuous supervision duties, and was therefore "named" by the regulator.
In this regard, Soochow Securities said that the company will actively cooperate with the relevant work of the China Securities Regulatory Commission and fulfill its information disclosure obligations in strict accordance with regulatory requirements.
On April 17, Soochow Securities' stock price fell by more than 5% intraday after it was filed by the regulator due to the private placement project. As of the close of the day, the stock closed at 6.28 yuan / share, down 3.53%.
Brokerages are facing tighter regulation
In addition to Soochow Securities, well-known securities firms such as CITIC Securities, Haitong Securities, and Huaxi Securities have also been "named" by regulators recently for private placement projects.
On April 12, CITIC Securities announced that it had received the "Notice of Case Filing" from the China Securities Regulatory Commission because the company was suspected of violating laws and regulations in the process of transferring the non-public issuance of shares of China Nuclear Titanium Dioxide in 2023 in violation of restrictive regulations. On the same day, CITIC China Securities Capital, a wholly-owned subsidiary of the company, also received the "Notice of Case Filing" from the CSRC for the same reason.
On the same day, Haitong Securities was also filed by the regulator for suspected violations of laws and regulations in the process of the company's non-public issuance of shares in 2023 by relevant entities in violation of restrictive regulations.
Huaxi Securities announced that it received a notice from the Jiangsu Securities Regulatory Bureau on April 11 that it intends to suspend the sponsorship business qualification for 6 months. According to the disclosure, Huaxi Securities is suspected of having a number of violations in the practice process of Jin Tongling's non-public issuance of shares in 2019, including: due diligence work is suspected of not being diligent and conscientious, there are false records in the sponsorship letter for the issuance of shares to specific targets, there are suspected false records in the relevant reports issued during the continuous supervision stage, and the on-site inspection work of continuous supervision is suspected of not being implemented in place.
Recently, 4 consecutive securities firms have been filed or punished by the regulator for violating the rules of the private placement project, what kind of signal is revealed?
Guo Shiliang, a financial commentator, told reporters that the new "National Nine Articles" emphasize the goal of strengthening supervision and building a high-quality capital market. Strengthening the supervision of securities firms, especially on private placement projects, is intended to improve the professionalism and compliance of relevant institutions.
Guo Shiliang believes that the follow-up supervision of sponsor institutions may be increased, and the era of "lying down to make money" is gone. In the future, in the private placement projects of listed companies, the business capabilities of securities companies will be more tested, and the compliance and professional guidance of the whole business process will be strengthened, so as to avoid the risk of benefit transmission or non-compliant operation in all aspects of the private placement project, and improve compliance, professionalism and diligence is the future development trend.
Shen Meng, director of Xiangsong Capital, pointed out that the regulatory authorities may believe that the previous market turmoil has a more obvious phenomenon of value fiction, which affects investor confidence, so they will focus on IPO and private placement and other financing projects.
Regarding the reason why brokerages frequently "overturn" in private placement projects, Shen Meng said that private placement or IPO are real-time, and some situations that were not a problem at the time may be a problem if they change time and space conditions. It is recommended that securities firms should maintain the basic principle of due diligence and do not elevate or beautify the project.