A Small Trick Leads To Arbitrage Storm: Six A Share Companies "Asset Compensation" To "Two Times" The Whole Story

Southern responsibility investment action researcher Yang Ping, Shenzhen

A shares are 30 years old. In a series of fancy illegal activities, capital occupation is a commonplace topic.

Nanzhi think tank, twenty-first Century economic report, southern responsibility investment action research team found that in 2019, the A share announcement has been punished by the regulatory authorities for 1591 times, involving 777 listed companies.

Among them, 294 listed companies involve shareholders or senior executives.

This week alone, a number of listed companies were punished by regulators for capital occupation and other factors. In April 21st, Hu Jinsheng, the controlling shareholder and chairman and general manager of Stelli, and the responsible persons were criticized by the Shanghai stock exchange for their non operating capital occupancy. In April 22nd, *ST Tiansheng controlling shareholder was issued a written decision on administrative supervision measures by the Securities Regulatory Commission due to his embezzlement and misappropriation of funds.

Faced with the emerging capital occupation risk, many irregularities have come up with a plan to solve the problem of capital occupation under supervision and supervision.

Time flies, do major shareholders really change their minds?

Research team research found that after the regulation and supervision, the capital occupied balance of Shanghai and Shenzhen two cities has declined, but there are still some enterprises that are not in line with the rectification, especially the listed companies which have applied for assets compensation funds to occupy the arrears.

"The purpose of these assets is to avoid punishment. After all, it is something that can be extended for a long time, but it is not known what is coming in." Southern China a medium-sized brokerage investment bank department pointed out.

Capital occupation is difficult to solve.

The market witnessed a large number of chain crises triggered by capital occupation.

Especially since 2018, some major shareholders of listed companies have broken the capital chain, and a lot of illegal occupation of funds of listed companies has emerged, which has brought down the normal operation of enterprises and even led to delisting.

On the other side of the risk, the offenders come up with solutions, but the actual rectification effect of some listed companies is not satisfactory.

The research team investigated and understood that, as early as early 2019, the controlling shareholder of Shengda Group, which had repeatedly committed to solve the problem of *ST up to fund occupation, was finally "self abandoned" after nearly 16 months. In April of this year, Shengda Group's bankruptcy reorganization application was accepted by the court. *ST rose to prepare the total amount of bad debts for the Shengda Group.

At the end of 2019, in the reply to the exchange inquiry letter, it promised that "Cheng Qian Xing stock, which is expected to solve the capital occupation" not later than the end of March 2020, said in the latest progress announcement: "the star group and its associated parties will thoroughly clean up the non operating capital occupation of Hon Bang Petrochemical before April 30, 2020."

This is just the tip of the iceberg. Worse still, some shareholders continue to "play tricks" on Listed Companies in the name of "repayment of occupancy".

The research team found that there was a "debt paying" approach to the problem of capital occupation. That is, the controlling shareholder, the actual controller and the related party shall pay the assets of the listed company with the assets they hold, or the other related party or the third party of the listed company shall compensate the occupying party for the occupied assets with the assets they hold.

In the case of cash shortage, the stock exchange can solve the problem of capital occupation by paying debts to solve the problem of capital occupation.

From the perspective of listed companies, the problem of capital occupation may lead to the issuance of non-standard and unqualified opinions and the hindered operation of the company's capital. Under severe circumstances, the company may be suspended from the market and even withdraw from the market. Therefore, the company may also be willing to accept the problem of capital occupation as soon as possible in the form of debt service.

However, from the existing cases, there are a lot of tricky problems in the implementation process of listed companies: first, the problem of asset quality.

The research team did not fully count the 6 listed companies who had taken the "debt paying" method since 2019, and found that the assets acquired were generally of poor quality. Among them, not less than 3 acquisition targets were negative assets, 3 of them had negative net profit in the latest year, and a listed company's assets were still being evaluated, and no specific financial data were disclosed.

The former investment bankers revealed that the common way for shareholders of listed companies was to expand their money from Listed Companies in vitro, such as buying assets or opening up some new businesses, and then pushing them back into listed companies to boost their share prices.

"But the problem now is the downside of the economy, the decline of some asset quality and even the explosion. If these assets do not explode, shareholders can completely return to the listed company system through the issuance of shares to buy assets, thus achieving a closed loop, but the problem now is that the big environment can not, and can not achieve the effect." It points out.

Debt restructuring as a loophole?

According to public information, the assets of the 6 listed companies that are currently paying debts are not only in financial data but also in common with the listed companies, and the valuation is generally high.

For example, the 37% stake of Julong copper, which is intended to be injected by Zang Ge holdings, is mainly engaged in mining industry. The net profit in recent year was -1.81 billion yuan, but the controlling shareholder was used to compensate for the occupation of 2 billion 590 million yuan of funds. The company with a net assets of only 2 billion 94 million yuan at the end of last year was priced at 7 billion yuan.

As early as this transaction, Zang Ge holdings had been the two time to buy the "dragon's mind" of the giant dragon copper industry, but all of them failed because of overvaluation, difficulty in making profits and immature restructuring conditions. This time, through the way of debt repayment, it has been hit by a mistake and completed the reorganization. Many market participants have banter as a "strong buy and sell".

The same story also took place in unnamed medicine. Before the announcement, unnamed medicine announced that it would repay the 507 million yuan capital and 54 million 356 thousand and 700 yuan interest of the large shareholder unidentified group's non operating occupancy of 100% yuan and 4 pharmaceutical technologies in Jilin.

According to unnamed medicine, Jilin Weiming mainly engaged in planting under forest ginseng business, and listed companies biotechnology research and development business far apart.

When the first announcement was made, the listed company said that the book net assets before Jilin's nameless name were 1 billion 813 million yuan. But after being questioned by regulators, Jilin's unnamed net assets were eventually revised to only 11 million 493 thousand and 400 yuan.

What is worth mentioning is that the name "medicine to pay debts" has also avoided the normal reorganization procedure.

According to the relevant regulations, the capital of non listed medical companies of unnamed medical holding company accounted for 18% of the net assets audited by unnamed medicine in 2018, and the matters related to controlling shareholders' debt repayment constituted related transactions. The parties concerned should avoid voting, but the company failed to fulfill the corresponding review procedures and disclosure obligations.

Earlier, some other members of the pharmaceutical technology filed complaints to the exchange that the unnamed group failed to carry out internal deliberation and decision-making procedures by paying debts in debt, and the other owners did not know their consent. The relevant owners were prepared to take measures to safeguard their rights.

"Most of the cases that are currently compensated for assets are negative, such as high price quotations and poor material quality. Most of them are shoddy and violate the interests of small and medium-sized investors." Pan Helin, executive dean of Digital Economics Research Institute of Zhongnan University of Economics and Law, pointed out.

A small and medium-sized private equity partner in Southern China also pointed out to the twenty-first Century economic news reporter: "the reason why the phenomenon occurs is that there is no good asset for big shareholders."

It believes that most shareholders who are not able to take up capital and collapse in cash flow have gone to this stage and basically sold off their assets.

Shareholders' wishful thinking

In addition to shareholders' "shoddy" and "strong buy strong sell", there are still some cases of listed companies' surprise trading "shell protection" intention.

According to public information, 4 transactions in 6 single transactions were completed at the beginning of the year.

The research team found that some enterprises may have the intention of "impacting transactions through the end of the year or adjusting the balance sheet date to affect accounting and annual audit opinions".

For example, *ST Tianma, whose audit report was issued in 2017, was unable to express its opinion. However, when the company completed the transfer of its debt assets in April 23, 2019, the annual 2018 annual report released in April 30, 2019, the Zhongxing finance Guanghua accounting firm issued an unqualified audit report with the "major uncertainty segment and emphasis on matters related to continuous operation" for the company's 2018 financial report. The debt repayment and the subsequent installment commitments made by the occupier only avoid the suspension of the listing of shares as a matter of stress.

"Now the accounting firm must have the contents to fill out the audit report, and the quality of the assets is good or bad. That's next year. This year's assessment report is OK." The foregoing investment bankers were interviewed.

What is even worse is that once the less qualified assets are injected into the listed companies, if the performance of commitments is not fulfilled or the quality of assets continues to deteriorate, the listed companies will undoubtedly form a bigger burden and continue to drag down the normal operation of listed companies.

The former investment bank added that many shareholders or themselves had bad intentions. "If the account is charged, the assets will not perform well in the future, and the impairment will be finished."

A senior investment bank source said: "according to the regulatory thinking, if the subsequent assets in the operation process is not well managed, and ultimately lead to impairment, the counterparty may need to replace the impairment part."

"I think it is necessary for shareholders (or counterparties) to make performance commitments and some compensation for the underlying assets. Otherwise, the so-called debt repayment mechanism will make the listed companies a large shareholder's ATM." Pan Helin said.

The team learned that regulators had been concerned about this "arbitrage" approach.

?