In recent years, with the decline in the performance of some listed companies, not a few small and medium-sized shareholders have asked for the reorganization of the board of directors. ST Xintong (600289, Yiyang Xintong) is the closest one.
On June 30, 2021, ST Information and Communications announced that the second Extraordinary General Meeting of Shareholders of 2021 will be held on the afternoon of July 16. Since then, on July 3, five minority shareholders holding a total of 3.07% of the shares proposed to add a provisional proposal at the meeting, including amending the company's articles of association, removing six current directors, and electing one as an independent director.
On July 14, ST Information and Communications announced that the board of directors passed a resolution to cancel the above-mentioned extraordinary shareholders' meeting. This move immediately aroused the attention of many parties such as supervision and the CSI Small and Medium-sized Investment Service Center.
Under the intensification of the contradiction between major shareholders and small and medium-sized shareholders, Yiyang Xintong, which was already in the darkest moment earlier, has further attracted widespread attention from the capital market.
01 Dragged by major shareholders, the "OSS hidden champion" fell into the darkest moment
Yiyang Xintong was founded in Harbin in 1995 and listed on the Shanghai Stock Exchange in July 2000. According to the official website, "Yiyang Xintong is one of the first 103 innovative key enterprises identified by the Ministry of Science and Technology, the State-owned Assets Supervision and Administration Commission and the All-China Federation of Trade Unions." In the 3G and 4G era, Yiyang Xintong's market share in the field of OSS (Telecom Operation Support System) has ranked first in the country. Around 2010, its OSS system accounted for more than 90% of China Mobile, more than 50% of China Unicom, and more than 40% of China Telecom.
With its professional strength in the field of segmentation, Yiyang Xintong occupies a place in the fiercely competitive domestic communications market. Wind data shows that from 2001 to 2016, the operating income of Yiyang Xintong steadily increased from 620 million yuan to 1.331 billion yuan, the net profit increased from 0.81 billion yuan to 130 million yuan, and the gross profit margin of sales increased from 37.19% to 65.01%.
For a long time in the past, Yiyang Group held 32.89% of the shares of Yiyang Xintong, and Deng Wei, who was the chairman of Yiyang Group at the time, was the actual controller of the company. However, in the second half of 2017, Deng Wei was taken away to assist in the investigation due to a corruption case, and the debt crisis of Yiyang Group broke out in an all-round way, and the steady operation situation of Yiyang Xintong was also broken.
According to the investigation results of the Heilongjiang Securities Regulatory Bureau, from the beginning of 2016 to September 26, 2017, Yiyang Xintong provided a total of 62 guarantees to related parties such as Yiyang Group, Hong Kong Yiyang Industrial Co., Ltd., Yiyang Group Fuxin Industry and Trade Co., Ltd., and Suifenhe Hud Trading Co., Ltd., with a guarantee amount of more than 6.845 billion yuan.
At the same time, Yiyang Group has long occupied the funds of Yiyang Communications through the signing of a business contract with Yiyang Xintong Technology Co., Ltd. and Beijing Wuzhou Botong Technology Co., Ltd. By the end of 2017, Yiyang Xintong's receivables to Wuzhou Broadcom amounted to 469 million yuan.
Regardless of the guarantee matters for related parties or long-term capital occupation projects, Yiyang Xintong has not fulfilled the review procedures and information disclosure obligations. Before the outbreak of the debt crisis of Yiyang Group, the outside world did not know anything about it.
After the capital chain of Yiyang Group was broken, Yiyang Xintong, as the guarantor, was naturally involved. According to public information, the total liabilities of Yiyang Group at that time were about 16 billion yuan, of which the part involving listed companies was about 4.5 billion yuan, and more than 100 financial institutions, including banks, trusts, securities companies and public funds, were involved. Shanghai Tengyun Assets, Cedar Trust, Beijing Yihe Mercury, Shaanxi Guotou, Jianghai Securities, Hongling Venture Capital, Tibet Trust and other institutions all use Yiyang Xintong shares held by Yiyang Group as collateral.
The default of Yiyang Group's debts led to the freezing of the main bank accounts, real estate and equity of Yiyang Xintong, and its operation was significantly affected. As of April 30, 2021, due to the litigation arising from the above-mentioned illegal guarantees, The funds of Yiyang Xintong have been executed, withheld and judicially auctioned by the court, involving 28 transactions, totaling 424 million yuan. Together with the major shareholders formed by Wuzhou Broadcom and other matters, 471 million yuan was occupied, and a total of 895 million yuan of funds were occupied.
The trouble-ridden Yiyang Xintong has plummeted in operating performance, and even once faced the risk of delisting. Wind data shows that at the end of 2020, its operating income was 524 million yuan, only 39.37% of the 1.331 billion yuan at the end of 2016; the net profit fell from 130 million yuan in 2016 to -362 million yuan in 2020, during which the maximum annual loss was as high as 2.48 billion yuan (2017); the total asset size fell from 4.146 billion yuan in 2016 to 2.579 billion yuan in 2020, a shrinkage of about 60% before this. During the same period, the number of employees in the company fell from a peak of 2888 to a recent 1534.
The sudden outbreak of the new crown pneumonia epidemic in the first half of 2020 has caused its operations to be hit hard again, with tight cash flow and low customer confidence, and its operations have entered a dark moment.
After being investigated by the CSRC on December 6, 2017, Yiyang Xintong resumed trading at the end of December 2017, and its stock price fell continuously, from about 11 yuan per share at that time to near 3.5 yuan per share. To this day, the stock price is still hovering around 3 yuan / share, and many investors have suffered heavy losses.
02 The "reorganization plan" was launched, and the holdings were raised
In 2018, all parties began to organize the launch of the debt treatment of Yiyang Group. On March 6, 2019, Yiyang Group applied to the Harbin Intermediate People's Court for bankruptcy reorganization on the grounds that it could not pay off its debts as they fell due and obviously lacked solvency.
On May 29, 2020, the Harbin Intermediate People's Court approved the "reorganization plan" of Yiyang Group. According to the plan, Wanyi Investment, a subsidiary of Dalian Hesheng Holding Group Co., Ltd. (hereinafter referred to as "Hesheng Holdings"), as a reorganization investor, participated in the restructuring of Yiyang Group, conditionally accepting 100% of the shares of Yiyang Group transferred by all the investors of Yiyang Group without compensation, and at the same time, the ordinary claims of Yiyang Group were fully repaid through the "cash + debt-to-equity swap" method.
According to the announcement, the conditions for Marriott Investment to transfer the shares of the original Yiyang Group investor include: Courtyard Investment will pay a deposit of 50 million yuan to Yiyang Group before May 20, 2020. After the draft change of the reorganization plan was approved by the creditors' meeting and approved by the court, Courtyard Investment paid RMB90 million to Yiyang Group. Under the premise that the listing of Yiyang Xintong was not suspended within 60 days after the court's ruling was served, Courtyard Bye Investment paid 160 million yuan to Yiyang Group. At the same time, Courtyard Investment used a bank guarantee of 700 million yuan in cash plus 556 million yuan to solve the occupation of the major shareholder of Yiyang Xintong and the potential further losses that may be caused by the violation of the guarantee. This means that Hesheng Holdings has paid real money and silver to enter the ownership of Yiyang Xintong and resolve the delisting risk of the latter.
After the completion of the restructuring of Yiyang Group, Courtyard Investment holds 51% of the shares of Yiyang Group and indirectly controls 32.89% of the shares of Yiyang Xintong. As a result, ST Xintong officially changed hands, and the parent company of Courtyard Investment and Sheng Holdings became the new actual controller.
On July 30, 2021, Yiyang Xintong also officially received the "Advance Notice of Administrative Penalties and Market Prohibition" from the Heilongjiang Securities Regulatory Bureau, which pointed out that the company was ordered to correct, warn and fined 600,000 yuan for information disclosure violations, while Deng Wei, the actual controller at the time, was banned from the market for life, and Deng Qing, then the executive president of Yiyang Group, was banned from the securities market for five years.
The results of the investigation and handling of the case of Yiyangxin Communications, which lasted for 1329 days, were finally settled. In a sense, Yiyang Xintong has turned a new page.
According to the official website information, As the new actual controller of ST Information and Communications, Hesheng Holdings was established in Dalian in 2007, and it not only controls the listing platforms such as Biochem (603360), ST Dazhou (000571), ST Xintong, but also owns non-listed enterprises such as Heyi Optoelectronics, Jingliang Hesheng, Yiyang Xintong, Xinguan Technology, Star Technology, Proud Chemical, Liaoji Luhang, Xuelong Animal Husbandry, Lanpucheng and other unlisted enterprises, with a total asset scale of tens of billions. It is 90% owned by Wang Wenfeng and 10% owned by Yuan Yixiang.
Roughly speaking, hesheng holdings' industries cover six major business sectors, including fine chemicals, new materials, high-end equipment, food, information technology, and financial investment. Among them, Baiao Chemical is mainly engaged in industrial fungicide products, Liaoji Luhang mainly develops and produces a new generation of military vehicles; Xinguan Technology develops and produces a new generation of semiconductor material silicon nitride high-tech enterprises; Lanpucheng is committed to the production of high-end optical films.
In July 2020, Yiyang Xintong established a new board of directors and management team. The shareholders' general meeting passed the cumulative voting system and elected 7 directors, including Zeng Jianxiang, Fang Yuan, Song Junde, Chen Xiaofeng, Lu Peng, Wang Xiaoning and Yuan Yixiang, yang Fangchun, Chen Jinrong, Zhu Lifei and Guo Jiesheng as independent directors, and 2 supervisors. Later, due to the resignation of zeng jianxiang and Song Junde, two directors, Cao Xing and Han Dongfeng took over the positions of the two.
The current board members Yuan Yixiang, Wang Xiaoning and Han Dongfeng are all from Hesheng Holdings, Cao Xing, Fang Yuan, Chen Xiaofeng and Lu Peng have grown up within Yiyang Xintong, while Cao Xing is currently the president of the company, Fang Yuan is currently vice president and secretary of the board of directors, and Chen Xiaofeng is the chief technology officer of the company. Overall, the current operating management of Yiyang Xintong is an old employee of the company, and the original core team can be retained.
Judging from the 2020 annual report and the first quarter of 2021, the performance of Yiyang Xintong has changed. Wind data shows that the year-on-year growth rate of Yiyang Xintong's operating income narrowed from -41.46% in 2019 to -28.67% at the end of 2020; in the first quarter of 2021, the year-on-year growth rate of its operating income scale increased from -77.72% in the same period of 2020 to 34.48%.
03 Minority shareholders propose to remove directors, and both sides have their own opinions
However, minority shareholders are not satisfied with the situation in which the business operation and stock price have been sluggish for many years.
On July 3, 2021, five minority shareholders, Namely Wang, Guo Shimin, Wang Risheng, Lv Xiufen and Wang Xiangye, submitted an interim proposal to add an interim proposal at the Extraordinary General Meeting of Shareholders held on July 16 to remove six current directors, including current chairman Yuan Yixiang, president Cao Xing, and director Lu Peng.
According to the Company Law, the Rules for Shareholders' Meetings of Listed Companies, etc., shareholders who individually or collectively hold more than 3% of the company's shares may submit a provisional proposal and submit it to the convener in writing 10 days before the shareholders' meeting. Wind data shows that the above 5 shareholders have long held Yiyang Xintong shares, in July 2021, Wang Liwei, Guo Shimin, Wang Risheng, Lu Xiufen ranked among the top ten shareholders, 4 people held a total of 2.98% of the company's shares, plus Wang Xiangye shares reached 3.07%.
In an interview with the media, the minority shareholders of Yiyang Xintong said that they were "very disappointed" in the current board of directors and management, believing that "Dalian Marriott did not have much affection for ST Xintong, nor did it invest enough energy" and "failed to clearly plan the company's strategic development path"; the business under Hesheng Holdings was too complicated, and it was difficult to invest too much money and management resources in several listed companies at the same time. Another minority shareholder said that he had repeatedly made suggestions to the board of directors on the company's development and stock price issues, but did not receive a reply from the chairman.
For the dissatisfaction of small and medium-sized shareholders, Hesheng Holdings said, "In the past few years, investors who were originally optimistic about Yiyang Xintong have invested in companies from the secondary market, but due to the sluggish stock price, it is also a fact that many investors have suffered huge losses, and they also have a deep understanding of the resentment of small and medium-sized shareholders."
However, "with the completion of the reorganization and the replacement of the actual controller of the major shareholder, the external dispute of Yiyang Xintong was basically resolved." The first step of Courtyard Investment has been completed, and the next step will begin to integrate the internal and external resources of listed companies and improve profitability, and the next step will promote the solution of ST to remove the hat, and the probability of removing the hat is very large"; "After the new board of directors and management team take over, the management of Yiyang Xintong has changed significantly", "Sorting out the original mess left behind has gradually entered the right track".
In the view of Hesheng Holdings, "the 5G industry in which the company is located has considerable market potential, and the operating conditions of Yiyang Xintong are gradually improving."
According to the introduction of the annual report, the current main customers of Yiyang Xintong are China Mobile, China Unicom and China Telecom. Although after several years of adjustment, Yiyang Xintong is still a leading manufacturer in the field of OSS and management support system (MSS), due to its early entry into the market, its share of the operator segment is still large, and its roots are still there.
In the context of 5G being regarded as the leader of "new infrastructure", 2020 is the first full year after the commercial use of 5G, major domestic operators are vigorously building 5G networks, and Yiyang Xintong is also facing market opportunities for the development of 5G networks. At present, it has also determined a corporate strategy to stabilize the traditional business of existing operators (ICTs) and vigorously develop innovative businesses. By the end of 2020, Yiyang Xintong has completed the access and management of 5G devices, and developed new capabilities and new systems such as slice management, cloud-network collaboration, and AIOps to meet the new planning requirements of operators in the digital transformation period.
Hesheng Holdings said that "the management to lead the company out of the current predicament can not be achieved overnight, and it requires more time and patience from small and medium-sized shareholders."
In response to the proposal of minority shareholders, Yang Fangchun, Chen Jinrong, Zhu Lifei and Guo Jiesheng, independent directors of Yiyang Xintong, said in their "independent opinions" that "the proposal involves the removal of the chairman of the company, as well as the directors of the president and some senior executives, which may have a significant impact on the company, and it is recommended that such proposals be temporarily shelved and resolved through consultation."
With the intensification of contradictions between the two sides, especially the cancellation of the extraordinary shareholders' meeting by the board of directors of Yiyang Xintong, this incident immediately aroused the attention of many parties. The SSE issued a regulatory letter in this regard, "requiring self-examination and verification as soon as possible on the performance of duties by relevant directors and whether there is insider trading among directors or senior executives". The China Securities Small and Medium-sized Investment Service Center held that "the reasons proposed by the board of directors for canceling the shareholders' meeting do not constitute justifiable reasons, so they oppose the cancellation of the company's shareholders' meeting". However, Yiyang Xintong has not yet announced further arrangements for the shareholders' meeting.
It is worth mentioning that on January 28, 2021, Courtyard Investment also received a warning letter issued by the Heilongjiang Securities Regulatory Bureau. The origin of the incident is that Hesheng Holdings indirectly controls 32.89% of the shares of Yiyang Xintong, which has triggered the obligation of a general tender offer, but it has not issued a general offer, nor has it prompted the shares of the listed company held by Yiyang Group to be reduced to less than 30%. On July 12, 2021, Courtyard Bye Investment and its actual controller, Wang Wenfeng, were again notified and criticized by the Shanghai Stock Exchange.
In response to this matter, Hesheng Holdings argued to the Shanghai Stock Exchange that the resolution of the issue of the freezing of the equity of Yiyang Group exceeded reasonable expectations, and Courtyard Investment had made every effort to urge Yiyang Group to take the initiative to raise objections to the court and apply for lifting the freezing. Due to the inadmissibility of some courts for the filing of the application for the lifting of the freeze by Yiyang Group, the equity has still not been completed, which objectively led to the inability of Yiyang Group to complete the reduction of holdings within the prescribed period. At the same time, the minority shareholders of Yiyang Group lack the willingness and ability to contribute capital, cannot complete the lifting of the equity freeze through litigation and settlement in a timely manner, and issuing a comprehensive offer is not conducive to safeguarding the interests of small and medium-sized shareholders.
It seems that there are still many knots to be undone in this reorganization.
04 Games and winners
After being involved in the debt crisis of the former major shareholder, although the restructuring was completed, the fierce game between the large and small shareholders made the direction of Yiyang Xintong once again become confusing.
In recent years, the proposal of minority shareholders to remove the current board of directors and management has appeared frequently in the A-share market. Since 2015, the minority shareholders of listed companies such as Shenzhen Konka A (000016), Innovative Medical (002173), S Giti (600182), Tianshen Entertainment (002354), and delisted Gongxin (600701) have all forced the board of directors, among which the small and medium-sized shareholders of Shenzhen Konka A have finally seized control of the board of directors, creating a precedent in China's securities market.
As early as June 2015, due to the decline in the performance of Shenzhen Konka A and the downturn in stock prices, small and medium-sized shareholders complained, and its major shareholder OCT once became the target of public criticism. Since then, the minority shareholders of Shenzhen Konka A have successfully seized control of the board of directors by using cumulative voting rules and online canvassing, and have since controlled the management.
After the small and medium-sized shareholders moved from the backstage to the front of the stage, they quickly implemented a series of reforms such as the hot "Internet +" at that time, and the middle-level business backbones who were familiar with the Internet were directly selected by the small and medium-sized shareholders to promote to the top level. In the nearly three months from June 4 to September 11, 2015, management representing minority shareholders undertook a series of radical reforms. However, after the new management took over, the personnel of Konka Group was in violent turmoil, and the whole company was once full of wind; the small and medium-sized shareholders who controlled the management were also under great pressure; the toss during the period caused deep Konka to be seriously injured, and the performance continued to decline.
In the end, the small and medium-sized shareholders who had been like-minded earlier ended up parting ways, and the "counterattack" drama of the board of directors of Konka Group controlled by the minority shareholders soon came to an end, and the major shareholder OCT was once again pinned on high hopes. After being caught in a game whirlpool, The Deep Konka, who was already struggling at the time, was even worse. It turned out to be a game without a winner.
Optimizing the equity structure of listed companies and strengthening the participation of small and medium-sized shareholders in governance has always been one of the core propositions of corporate governance. Referring to the case of Shenzhen Konka A, the minority shareholders of Yiyang Xintong also have the possibility of mastering the company's board of directors and even the management, but once the minority shareholders control the company, the next step is still how to coordinate the relationship with other shareholders and how to solve the company's operational dilemma. From this point of view, all shareholders look for a balance point of cooperation and work together to promote the development of Yiyang Xintong or the best result.
This article originated from New Fortune