After receiving administrative penalties for financial fraud, letter disclosure violations, and fraudulent issuance, *ST Meishang (300495) was again investigated by the China Securities Regulatory Commission.
On the evening of April 21, *ST Meishang announced that due to non-standard financial accounting and failure to fulfill information disclosure obligations in accordance with regulations, the company was recently ordered to correct regulatory measures by the Shenzhen Securities Regulatory Bureau, and at the same time, the company was filed by the China Securities Regulatory Commission on April 19, 2024 due to suspected violations of information disclosure laws and regulations.
In recent years, *ST Meishang has frequently been subject to regulatory attention or punishment due to issues such as performance, information disclosure, and internal control, and has received 9 letters of concern intensively since 2024, and the company and its controlling shareholders have also been administratively punished in the past year.
In the secondary market, *ST Meishang's share price has accelerated its decline recently, and as of April 19, the stock closing price has been below 1 yuan for 10 consecutive trading days, or there is a risk that the listing will be terminated because the stock price is below par value.
Order correction + file for investigation
According to the announcement, the reason why *ST Meishang was investigated this time was suspected of violating laws and regulations in information disclosure.
Combing through past announcements, it can be seen that this is not the first time that *ST Meishang has been filed. In December 2021, the company and its controlling shareholder Wang Yingyan were filed by the China Securities Regulatory Commission for illegal information disclosure, and the relevant parties of the company have received an administrative penalty decision.
At the same time as the case was filed, *ST Meishang was issued a decision on administrative supervision measures by the Shenzhen Securities Regulatory Bureau due to two major problems: irregular financial accounting and failure to fulfill information disclosure obligations in accordance with regulations:
In terms of financial accounting, the company actually controls Changning Keka Ecological Governance Investment and Development Co., Ltd., but has not included it in the scope of consolidation of financial statements and disclosed it.
From April 2021 to April 2023, the Company made 6 corrections to accounting errors in previous years, but except for the 2020 financial statements, it did not assess whether the correction of errors had an extensive impact on the financial statements of the remaining years and the change in the nature of profit and loss, so as to decide whether to conduct a comprehensive audit of the corrected financial statements of the relevant year.
In the 2022 semi-annual report, the impact of minority shareholders' interests and impairment of the assets of subsidiaries was not considered in the accounting of income from the disposal of subsidiaries.
In 2022, the impairment provision of fixed assets, intangible assets, and productive biological assets was not prudent.
In 2022, due to the inability to perform the factoring-related contracts due to the expiration of the contract, the debt restructuring loss was recognized, and the relevant items were adjusted after the balance sheet date in 2021, but the relevant losses were not recognized in the 2021 financial statements.
In terms of information disclosure, *ST Meishang failed to disclose major lawsuits in a timely manner and the matters of the administrative penalty decision received by the controlling shareholder Wang Yingyan. In addition, during the period from 2020 to 2021, the company borrowed money from related parties such as senior management, and the company did not disclose it as required.
In addition to the above problems, *ST Meishang also has problems such as inaccurate disclosure of information in the 2022 annual results forecast, failure to truthfully disclose material deficiencies in the 2021 and 2022 internal control self-evaluation reports, the use of personal accounts to manage the company's funds, the irregular operation of the three committees, incomplete registration of related parties, inadequate registration and management of insiders of inside information, and untimely update of the internal management system.
In view of the above-mentioned violations of laws and regulations, the Shenzhen Securities Regulatory Bureau decided to take regulatory measures against *ST Meishang to order corrections.
Financial fraud, fraudulent issuance
In fact, the above behavior is only the tip of the iceberg of *ST Meishang's violations of laws and regulations.
As early as July 2023, *ST Meishang was punished by regulators for financial fraud and fraudulent issuance for many years.
According to the administrative penalty decision, from 2012 to the first half of 2020, the company inflated its net profit by recognizing accounts receivable in advance, falsely recording bank interest income, adjusting project income without adjusting the approved amount, and inflating the income of subsidiaries, with a cumulative inflated profit of more than 400 million yuan.
In addition, *ST Meishang has not disclosed major litigation, related party transactions and large amounts of funds occupied by controlling shareholders as required, and as of the end of 2020, the cumulative balance of non-operating funds occupied by relevant parties is nearly 1 billion yuan.
Due to the undisclosed occupation of non-operating funds and long-term financial fraud, *ST Meishang constituted fraudulent means to obtain issuance approval during the 2018 non-public offering, which touched the fraudulent issuance.
In view of the above situation, the China Securities Regulatory Commission decided to order *ST Meishang to make corrections, give a warning, and impose a fine of 13.3 million yuan, impose fines of 15.1 million yuan and 530,000 yuan respectively on the actual controllers Wang Yingyan and Xu Jing, and impose a lifetime ban on Wang Yingyan from entering the securities market, and impose a fine of 50,000 yuan to 700,000 yuan on other responsible persons.
It is worth mentioning that as the main person responsible for organizing and manipulating the above-mentioned illegal acts, Wang Yingyan, the actual controller of *ST Meishang, was also punished in February this year for manipulating his own stocks.
Specifically, from June 12, 2018 to July 3, 2020, Wang Yingyan and Ji Yun actually controlled and used the account group involved in the case, concentrated their capital advantages and shareholding advantages, continuously traded "Meishang Ecology", manipulated "Meishang Ecology", and bought a total of 3.14 billion shares and 39.984 billion yuan, and sold 3.138 billion shares and sold 39.798 billion yuan, with an account transaction volume of nearly 80 billion yuan. After deducting commissions and related taxes, the account group lost 238 million yuan.
For the above behavior, the China Securities Regulatory Commission decided to impose fines of 5 million yuan and 3 million yuan on Wang Yingyan and Ji Yun respectively.
The risk of delisting at face value is high
After various violations of laws and regulations were exposed to the public, investors chose to vote with their feet, and *ST Meishang's stock price fell sharply. Since April 8, the company has closed below 1 yuan for 10 consecutive trading days and is facing the risk of delisting at face value.
In addition to the risk of delisting at par value, *ST Meishang also needs to face multiple pressures.
As early as May 7, 2021, the company was issued an audit report with no opinion due to the financial report of 2020, and was put on delisting risk warning, and at the same time, due to the occupation of non-operating funds by controlling shareholders and related parties, other risk warnings were superimposed.
Previously, although the company had submitted an application to the Shenzhen Stock Exchange in May 2022 to withdraw the delisting risk warning, it is still in the supplementary materials period, and there is still uncertainty about whether it can be approved. According to the regulations, if the application for revocation of the delisting risk warning is not approved by the Shenzhen Stock Exchange, the company's shares will be terminated from listing.
Due to the inability to repay debts when due, in October 2022, Shenzhen High-tech Investment Group Co., Ltd. applied to the Shenzhen Intermediate People's Court for the reorganization of *ST Meishang.
In December 2022, the court decided to initiate pre-reorganization proceedings against the company and appointed Beijing King & Wood Mallesons (Shenzhen) Law Firm as the administrator during the pre-reorganization period. Up to now, the company has not received the court's ruling on the acceptance of the reorganization matter, and there is uncertainty as to whether the court will accept the reorganization of the company and whether the company will enter the reorganization procedure.
Since 2024, *ST Meishang has received a total of 9 letters of concern from the exchange. The Shenzhen Stock Exchange requires the company to clarify whether the audited net profit for 2023 is negative and the operating income after deduction is less than 100 million yuan, and whether the company's disclosure of the "2023 Annual Results Forecast" involves the correction of accounting errors, whether the accounting treatment is appropriate, and whether it complies with the relevant provisions of the "Accounting Standards for Business Enterprises".