Behind ST Huawei's seven-degree delay in replying to the inquiry letter: 15 down limits in 20 trading days, and 1.3 billion yuan of funds were "bored".

China Times

2024-06-01 22:08Posted on the official account of Beijing China Times

Under the tide of ST shares, there are few like ST Huawei (600360.SH), there were 14 one-word limits in 20 trading days within a month, and the stock price shrank by 70%, during which 1.3 billion yuan of funds "bought the bottom" but were trapped.

After the internal control audit report of Huawei Electronics (hereinafter referred to as "ST Huawei") was suddenly hit by ST due to major deficiencies in the accounting treatment of the company's construction projects and other non-current assets, the internal control audit report issued by the then auditor with a negative opinion was suddenly ST, and the stock price began to fall for 9 consecutive words since May 6; On May 17, the company announced that due to suspected information disclosure violations, it received a regulatory inquiry letter on information disclosure from the Shanghai Stock Exchange and a notice from the China Securities Regulatory Commission to file a case, and the stock price once again appeared 3 one-word drop limits; On May 31, the company announced that it was delaying its reply to the Shanghai Stock Exchange's inquiry and regulatory letter. For a whole month, ST Huawei had a total of 15 falling limits, and in the five trading days from May 21st to 28th, there was a "tragedy" of a large number of funds entering the market to buy the bottom but being trapped.

In fact, when the company released its 2023 annual report and the first quarter of 2024 on April 30, the annual report was profitable, of which the net profit attributable to the parent company in the first quarter was 15.55 million yuan, a year-on-year increase of 198.27%, and Huawei Electronics has never suffered a loss since its listing. However, the reason why the company was suddenly implemented ST was that the accounting firm issued a 'non-standard' opinion on the accounting treatment of 500 million yuan of construction in progress and 900 million yuan of procurement in its annual report, indicating that the company's internal control was problematic, which shareholders did not expect at all, and it thundered without warning. On June 1, Zhang Tao (pseudonym), a shareholder who holds ST Huawei, reluctantly told a reporter from the China Times.

In the eyes of industry insiders, it is not only the existing investors who are "trapped", but even a number of foreign capital, public index funds and the Hong Kong Securities Clearing Co., Ltd. have been "smothered" by more than a dozen falling limits.

A case was opened for investigation

According to public information, ST Huawei, which is listed on the A-share main board, is headquartered in Jilin and is an IDM-type national high-tech enterprise integrating power semiconductor device design and development, chip processing, packaging and testing and product marketing. The company has a number of power semiconductor discrete devices and IC chip production lines such as 4-inch, 5-inch, 6-inch and 8-inch, with an annual chip processing capacity of 4 million pieces, 2.4 billion packaging resources and 24 million modules per year. The total share capital is 960 million yuan, the largest controlling shareholder is Shanghai Pengsheng Technology Industry Co., Ltd., the actual controller is Zeng Tao, and the audit institution is Zhonghua Certified Public Accountants (special general partnership).

Judging from the previously disclosed financial report data, ST Huawei's revenue from 2019 to 2022 will be 1.656 billion yuan, 1.719 billion yuan, 2.210 billion yuan, and 1.953 billion yuan respectively, and the net profit attributable to the parent company will be 65 million yuan, 34 million yuan, 116 million yuan, and 58 million yuan respectively. In 2023, the operating income will be 1.742 billion yuan, a year-on-year decrease of 10.82%; The net profit attributable to the parent company was 36.8694 million yuan, a year-on-year decrease of 36.16%.

The "fuse" for ST Huawei to be subject to other risk warnings, inquiries by the Shanghai Stock Exchange and filing of cases by the China Securities Regulatory Commission was the "2023 Internal Control Audit Report" issued by Zhonghua Certified Public Accountants with a negative opinion at the end of April this year.

According to the content of the regulatory inquiry letter issued by the Shanghai Stock Exchange on the evening of May 16 on ST Huawei's 2023 annual report, it mainly involves ST Huawei's 2023 financial report and internal control report were issued with qualified opinions, negative opinions and other non-standard audit opinions, and the company's unsettled amount of 504 million yuan in the book balance of construction projects and other non-current assets, including 981 million yuan of purchase payments in previous years, totaling up to 1.484 billion yuan, and the commercial substance of the payment is doubtful.

According to the content of the inquiry and supervision letter issued by the Shanghai Stock Exchange on May 16, "ST Huawei explained the specific situation of the funds involved in the non-standard audit opinion, whether the above-mentioned funds directly or ultimately flowed to related parties, and whether they constituted the occupation of non-operating funds by related parties; and the collection arrangement of the relevant funds, clarifying the specific time of expected recovery and whether there is a risk of non-recovery. ”

However, some market participants pointed out that there were already various signs that the company had major financial problems before the ST Huawei thunderstorm.

"The report of the audit institution is the fuse, and behind the fuse is a report letter about ST Huawei submitted to the Shanghai Stock Exchange in January 2023, which is a complaint that Zeng Tao, the actual controller of Huawei Electronics, the controlling shareholder Shanghai Pengsheng, and the chairman Xia Zengwen have misappropriated and embezzled large amounts of funds from listed companies through Shanghai Bensai Industrial Co., Ltd. (later renamed Shanghai Fravo Technology Co., Ltd. and cancelled, hereinafter referred to as "Shanghai Bensai") and other entities for a long time, and are suspected of fraudulent issuance of allotments. In addition, some of the financial data disclosed by the company in the early stage of the regulatory work letter reply announcement are untrue. On May 31, a person in charge of a private equity institution in Shanghai, who did not want to be named, told this reporter.

The petition materials also stated that from August 17 to August 18, 2015, the industrial and commercial bank account of Huawei Electronics with tail number 2560 transferred a total of 330 million yuan to the China Merchants bank account with the tail number 0111 of Shanghai Bensai through Beijing Aozhi Zhongda Technology Development Co., Ltd., Beijing Aozun Information Technology Co., Ltd., and Beijing Sanyang Today Technology Co., Ltd., and Shanghai Bensai transferred a total of 330 million yuan to Zeng Tao, Chen Xiaorui, and Tao Wenbo with tail numbers 2231 and 6933 respectively on August 19, 0375's China Merchants Bank account was transferred to 33 million yuan, 67 million yuan and 244 million yuan, which was the same amount and time as the payment of the equity transfer.

Subsequently, in September 2023, the Department of Management of Listed Companies on the Shanghai Stock Exchange issued a regulatory work letter to Huawei Electronics, requiring the company to make a written reply and fulfill its information disclosure obligations within 5 trading days. At that time, Hua Microelectronics disclosed the content of the working letter in more detail on September 27, 2023. According to the announcement, on August 19, 2015, Zeng Tao, Chen Xiaorui and Tao Wenbo respectively transferred the shares of Shanghai Pengsheng directly or indirectly held by Liang Zhiyong and Wang Qingzhi for 33 million yuan, 67 million yuan and 244 million yuan respectively.

However, the SSE obviously did not accept this reply, and the SSE continued to require Huawei Electronics to fully verify and list the details of the above-mentioned fund transactions between the accounts from August 17 to August 19, 2015, and provide supporting materials such as bank statements; Supplemental disclosure of the specific basis on which the transferee's share purchase funds come from its own and self-raised funds, the names of the direct and final borrowers of the self-raised funds, and whether the information disclosed in the previous period is true and accurate; Combined with the above questions, explain whether the company's funds have been used to purchase equity after being occupied by Zeng Tao and others, and if so, further explain whether and when the above-mentioned funds will be returned to the company; At the same time, the company is also required to fully verify and list the details of the capital transactions between the company and Shanghai Bensai and Shanghai Pengsheng from April 1 to April 4, 2019, and provide bank statements and other supporting materials; Explain whether the company's funds have been directly or indirectly used to participate in the company's allotment after being occupied by Shanghai Pengsheng and others, and whether the information disclosed in the early stage is true and accurate; Supplemental disclosure of the names of the direct and ultimate financiers of Shanghai Pengsheng's borrowings from March to April 2019, and the repayment progress and source of repayment funds in combination with Shanghai Pengsheng's capital situation and main operating data in the past three years.

After the expiration of the reply period for the above-mentioned letter, Hua Microelectronics applied for an extension of 5 trading days to reply seven times, and finally delayed the reply announcement until November 11, 2023.

In the announcement issued by ST Huawei on January 18 this year, the Shanghai Stock Exchange pointed out that the company still did not provide relevant bank statements and other supporting materials as required by the work letter, and said that it was expected to be provided by the end of November 2023, but after repeated regulatory supervision, the company has not provided it as of January 15, 2024. The SSE believes that Huawei Electronics violated the relevant regulations of the SSE by failing to respond to the regulatory letter in a timely manner and fulfilling its obligation to disclose the letter, nor by failing to provide relevant documents in accordance with the regulatory requirements and the time limit promised by the company's announcement. Sun Cheng, the secretary of the board of directors at the time, failed to be diligent and conscientious.

In view of the facts and circumstances of the above-mentioned violations, in accordance with the relevant regulations, the Shanghai Stock Exchange decided to give a regulatory warning to Sun Cheng, the then secretary of the board of directors of Huawei Electronics, and at the same time required the directors, supervisors and senior executives of Huawei Electronics to take effective measures to rectify the relevant violations.

That is to say, whether it is the inquiry and supervision letter of the Shanghai Stock Exchange, or the non-standard opinion of the audit institution, or the notice of filing the case issued by the China Securities Regulatory Commission, all the spearheads point to one point - ST Huawei's 500 million yuan of construction funds and 900 million yuan of procurement funds are very likely to be embezzled by major shareholders and related parties. Otherwise, the exchange and the regulator will not pursue these two unmanageable financial accounts, and under strict supervision, ST Huawei's financial fraud may become a typical case, and the subsequent company's stay on the exchange and investor compensation may be a long process. In this regard, Gao Feng, a partner of a law firm in Shanghai, pointed out in an interview.

In fact, even for the Shanghai Stock Exchange's inquiry and regulatory letter on May 16, ST Huawei announced on May 31 that it would delay the reply by 5 working days.

1.3 billion yuan of funds were trapped

There is also great doubt in the market about how likely a response is.

"We feel that there is a problem with the company's current operation, and in May, ST Huawei successively announced that Zhao Dongjun, the director who is currently acting as the chairman, and Yu Shengdong, the director and CEO who is acting as the secretary of the board of directors, gave up running for personal reasons after being nominated as a director candidate. Including independent directors, all five current directors of ST Huawei are not eligible for election as new directors. In addition, in the early stage, ST Huawei successively announced the resignation of Sun Cheng, secretary of the board of directors, due to physical reasons, and Xia Zengwen, chairman of the board, was unable to perform his duties due to physical reasons. Although the company announced on May 17 that it had established a special self-inspection leading group and hired a third-party professional audit agency to carry out a comprehensive self-inspection on the matters involved in the company's 2023 non-standard audit report, it feels that the possibility of results in early June is not too high. An institutional investor of ST Huawei said helplessly.

It is worth noting that, according to Hua Microelectronics' 2023 internal control audit report, there are significant deficiencies in the accounting treatment of the company's construction projects and other non-current assets. The report pointed out that Hua Microelectronics failed to effectively implement the relevant internal control system, resulting in the outstanding balance of some suppliers in the book balance of the construction in progress as high as 504 million yuan, and it was unable to implement effective audit procedures to obtain sufficient and appropriate audit evidence on the commercial substance of the transactions related to the above-mentioned payments. In addition, as of December 31, 2023, the book balance of other non-current assets of Huawei Electronics included a total of 981 million yuan of the unrecovered purchase money of the equipment returned by the company to suppliers in 2023 and the purchase money for which the company did not have a clear arrival plan.

Under the invasion of such a huge "bearish", the market still has funds to buy ST Huawei.

According to the data of Oriental Choice, ST Huawei from May 6 to 21 appeared 12 one-word down limit, on May 22 the 13th one-word limit was suddenly opened, a large number of funds to buy the company's shares, the same day traded 529 million yuan, the turnover rate of more than 17%, At that time, ST Huawei's share price had fallen from 6.20 yuan before the suspension to a minimum of 3.17 yuan, and then in the next few trading days, there were funds coming in to buy the bottom, 259 million yuan on May 23, 209 million yuan on May 24, 192 million yuan on May 25, 154 million yuan on May 26, and 1.3 billion yuan in five trading days.

"The risk is too great, before the company's suspected information fraud has no clear results, so much money, even including institutions, entered the market for three reasons: first, there is no problem with the company's current operation, so it will not be ordered to delist; Second, the company's stock price is low enough; Third, the company is mainly engaged in the field of semiconductors and chips, which is a hot field at present. However, according to the public data of the Dragon and Tiger List, these bottom-buying funds are mainly based on institutions, because the listed seats in the past few trading days are all institutional trading seats. The data of the Dragon and Tiger List on May 31 showed that funds from several Lhasa business halls of Oriental Fortune had entered the market, and signs showed that retail investors were also beginning to move. In this regard, Wang Jun (pseudonym), director of another secondary market private equity institution in Shanghai, analyzed.

As for the stock price "halved", what should 110,000 investors do because of the stock price loss caused by ST Huawei's suspected information fraud?

Gao Feng believes: "Huawei Electronics disclosed the "Notice of Case Filing" issued by the China Securities Regulatory Commission, which stated that Huawei Electronics was investigated for suspected information disclosure violations. We believe that the scope of investors who can claim is closely related to the time of occurrence of the violations of Huawei Electronics' information disclosure, and the specific circumstances are not yet clear, and it is preliminarily believed that investors who hold shares as of April 29, 2024 have the opportunity to demand compensation from Huawei Electronics for part of their losses. According to the provisions of the Securities Law and relevant judicial interpretations, investors can claim compensation for the loss of investment difference, commission loss and stamp duty loss, among which the loss of investment difference can be understood as the cost of the bubble that the investor overspends on the bubble price, and the amount of the loss of the investment difference is related to the purchase price and the number of shares. ”

In Gao Feng's view, with the regulator's intervention, the aforementioned accountants' doubts are likely to eventually become part of the regulator's investigation conclusions.

Editor-in-charge: Xu Yunqian Editor-in-chief: Gong Peijia

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