Li Dongsheng Borrows No Shadow &Nbsp; Investors Question The Use Of Loopholes In Arbitrage.

Li Dongsheng, chairman of TCL (000100.SZ), has been debated recently because of the announcement of selling shares to repay debts.

First, we should make good use of good information.

After a series of positive results, shareholders quickly reduced.

Investors questioned whether Li Dongsheng used the loopholes in the letter to carry out arbitrage - capital idle people borrow to senior executives, and then participate in private placement through their names.

Borrowing "no shadow"

The reporter reviewed the announcement of TCL's non-public offering listing and the 2010 annual report, which was released in July 2010. None of them disclosed the information of Li Dongsheng's loan. This means that if it is not a notice of reduction, most investors may not even know that there is such a huge loan in the TCL targeted private placement.

A TCL investor questioned whether it was appropriate to tell small investors to borrow money before paying the money.

But before the private placement in 2010, Li Dongsheng was able to pledge all his 40 million 160 thousand shares of tradable shares.

According to the announcement at that time, its pledge is the credit of Guangdong small and medium enterprises and then Company limited by guarantee, but Li Dongsheng still kept Pledged Shares as of March 2011.

A bank official told the first Financial Daily reporters: "in the form of pledge shares to obtain loans, lifting the pledge should be realized after repayment."

The announcement of Li Dongsheng's reduction and lifting of pledge was released on the same day. Because of the relationship between pledge equity and loan, no announcement was made in the announcement, so the outsiders were not aware of how the money was moved.

Many investment bankers said that although there is no provision for private placement to disclose the source of funds, they should be disclosed at the time of listing. Since this is one of the motivations for future reduction, it should also be disclosed to other subscribed shareholders.

There are also investment bankers who believe that disclosure should be handled in accordance with the relevant provisions, and there is no obligation to disclose if there is no mandatory disclosure.

Expedited financial investment

Because TCL has not disclosed to Li Dongsheng whether it is an individual or an institution, there is no regulation and supervision of personal debt problems of executives, leading to the formation of a new investment pattern: can the idle funds borrow money to executives, participate in mergers and acquisitions, and then choose the selling points by executives, so as to achieve "win-win"?

Investment bankers say that the feasibility is great.

"First of all, reducing the old shares is not illegal.

Second, it is not illegal to borrow money to participate in fixed growth. That is to say, the profit model of "loopholes in drilling system" is possible.

This reporter comparison found that Li Dongsheng's reduction and the company issued favorable timing of stock price rise "coincidence".

Li Dongsheng announced the reduction of 40 million shares, the average price of 3 yuan after the elimination of the stock price, a total cash of about 120 million yuan.

Excluding the principal amount of 100 million yuan debt, the cash offer still has a surplus of around 20 million.

In the private placement report, Li Dongsheng and TCL Klc Holdings Ltd, the largest shareholder in Huizhou, have been frozen for 36 months.

The remaining subscribers were frozen for 12 months until August 3rd of this year.

But Li Dongsheng's borrowers can recover their capital in advance. From the perspective of financial investment, the income model that bundles the interests of senior executives and borrowers through creditor's rights is much more stable than that of private participation in private placement or two level market purchase. Of course, it is unknown whether more and more people will follow suit.

"Foreign investment banks lend money to listed companies. It is a common behavior to pay debts after the company is strong. This investment is for strategic consideration.

Domestic investment banks can not carry out such businesses for the time being, but there are no restrictions on similar investments through executive channels.

One investment bank said.

In the case of TCL, the borrowers actually did not participate in the private placement, and the shares did not belong to them.

For Li Dongsheng, equity is also under its own name.

However, the creditor relationship attached to equity may affect the disposition of future equity.

"Whether it is defined as behalf of the shares depends on the agreement between the two sides."

The investment bankers said, "there are very few agreements for the generation of shares, most of which are loan agreements, which are only cash pactions.

Therefore, it can be questioned that it is disguised instead of acting, but it can not be confirmed.

Large shareholder model directed placement

Why not hesitate to borrow money to subscribe for private placement?

TCL's official view is that it is optimistic about the prospects of the company, but the reduction of stocks itself is unavoidable. The explanation is quite difficult to justify.

In this regard, the reporter failed to contact TCL stakeholders.

Insiders say that the purpose of private placement is to let companies introduce strategic investors, but now they are increasingly becoming the tricks of old shareholders' "empty handed White Wolf".

It is reported that many listed companies in order to attract funds, their major shareholders or executives will take the lead in the subscription of shares as an example.

These old stockholders have stock stocks, and thereafter there will be no substantial changes in equity and capital through reduction.

However, after seeing the "determination" of major shareholders, other investors took an active part in the issuance.

"At the same time, large shareholders will sometimes underwrite their remaining shares for the purpose of successful issuance.

"Participation in private placement is due to strategic investment, but now it has become a financial investment.

At present, there are restrictions on controlling shareholders' participation in private placement and further reduction, but there are very few restrictions on executives, which are easy to be used objectively. "

The investment bankers think so.