The First Case Of Failure Under The Gem Registration System: Huaao Automobile Was Called To Stop Business On The Eve Of The Second IPO

On August 4, the first batch of new shares registered on GEM was officially opened for subscription. Within a week, there will be 6 gem registered companies to apply for purchase.

However, just as the new season of gem is about to start, Beijing Huaao Automobile Service Co., Ltd. (hereinafter referred to as "Huaao Auto") has become the first enterprise under the gem registration system to be "cancelled the audit".

According to the arrangement of the regulatory authorities, Huaao Auto's IPO application, which was supposed to be reviewed at the deliberation meeting of the GEM Listing Committee held by Shenzhen Stock Exchange on July 28, was suddenly suspended the night before the audit.

According to the supplementary announcement of the 9th review meeting issued by the Shenzhen Stock Exchange on the evening of July 27, "in view of the major issues occurred after the announcement of the above review meeting, in accordance with the relevant procedures, the review meeting of the municipal Party committee cancelled the examination of the listing application of Huaao automobile".

Why did you stop at the meeting? The reporter of 21st century economic report learned that there is a saying in the market that it may be reported because of its operation qualification. However, this statement has not been confirmed by the reporter from Hua'ao automobile and relevant parties.

In fact, this is not the first time Huaao automobile has rushed into a shares. Its IPO was first submitted to Shenzhen stock exchange for review in June 2018.

From the feedback and reply of IPO related to the two sprint, there are also some problems worthy of attention.

The business relies on 4S stores and has not been replaced?

Founded in 2008, Huaao automobile is a third-party automobile extended warranty service provider, whose main business is vehicle inspection and evaluation and extended warranty service. At present, the company's vehicle testing and evaluation services are mainly used in 4S shops (with extended warranty), vehicle mortgage loans, vehicle transactions and other scenarios, and is expanding to new energy vehicles and remanufacturing core parts of motor vehicles.

According to the latest prospectus (Draft for the meeting), the main business income of Huaao automobile mainly comes from automobile inspection and automobile extended warranty service.

The reporter noted that an interesting detail is that there is no specific address in the column of "main production and operation address" in the prospectus of Hua'ao automobile, but "in the cooperative 4S stores".

This is related to its business model.

Huaao automobile mainly adopts the mode of cooperating with 4S stores and sending sales personnel to sell directly to customers in 4S stores to carry out inspection and extended warranty business. The business relies on the 4S store system.

According to the prospectus, as of December 31, 2019, Huaao has cooperated with 994 4S stores.

From 2017 to 2019, the revenue of Huaao automobile is 459 million yuan, 510 million yuan and 533 million yuan respectively.

Among them, the revenue of testing and evaluation service in recent three years is 399 million yuan, 434 million yuan and 440 million yuan, accounting for 87.03%, 85.10% and 82.65% of the total revenue; the revenue generated by extended warranty service in recent three years is 59 million yuan, 76 million yuan and 92 million yuan, accounting for 12.94%, 14.89% and 17.35% of the total revenue.

In 2018 and 2019, the gross profit margin of the company's testing business decreased compared with that in 2017, mainly due to the rising operating costs of 4S stores in various regions. In order to maintain a stable business cooperation relationship, the company increased the proportion of technical service fees paid to some cooperative 4S stores, resulting in a decrease in the gross profit rate of testing and evaluation services in 2018 and 2019. Specifically, during the reporting period, the procurement technical service fees were 71.140 million yuan, 81.99 million yuan and 87.40 46 million yuan respectively.

It is worth noting that the cooperation with 4S stores will not only affect the gross profit margin. Huaao automobile does not have its own corresponding site or inspection workshop, and it mainly sends full-time customer managers to sell in 4S stores. When carrying out the inspection and extended warranty business, Hua'ao automobile company pays the service fee to the 4S shop, and the 4S shop provides the necessary station use, equipment support, data support, publicity and display services to the company.

It can be seen that a lot of Huaao's business depends on 4S stores, including collection, business sales, car inspection service, etc., which has formed a serious dependence on the 4S store system.

In fact, the close relationship with 4S stores is also the focus of the exchange in the IPO application of gem. The Shenzhen Stock Exchange has paid close attention to the entrusted 4S store to collect service payment and the business relationship between the issuer and the 4S store.

The main reason why the 4S stores rely on and the business logic of the 4S stores directly replaced by the 4S stores in Shenzhen is that the business relationship between the 4S stores and the commercial dealers is not disclosed.

The license for concurrent insurance agency business has expired

Another key point that the market pays close attention to is its business qualification and legal compliance of business development.

The reporter of 21st century economic report noted that as early as its first sprint to the gem, the securities regulatory commission paid special attention to this in its feedback.

In the feedback opinions disclosed on May 10, 2019, the CSRC pointed out in Article 2 of the normative issues that the main qualification of the issuer's production and operation is "insurance concurrent business agent business license" (hereinafter referred to as "license"). The Interim Measures for the administration of concurrent insurance agents (hereinafter referred to as the measures) stipulates that the business model of concurrent insurance agents is not completely consistent with the disclosure of the prospectus of the issuer. Meanwhile, in order to control the risks, the issuer "shall, while providing extended warranty service, insure the insurance company with" extended warranty liability insurance for motor vehicles " In practice, some industry companies are not insured or partially insured.

The CSRC requires it to state whether the main business of the issuer belongs to quasi financial business, and, in combination with the specific business situation of the issuer and its subsidiaries, make supplementary disclosure on whether the issuer, the issuer's subsidiaries, branches and relevant personnel have obtained all the necessary qualifications, licenses or certifications for engaging in business, whether the acquisition process is legal and compliant, and whether the validity period can cover the business development period of the issuer It is necessary to make a supplementary explanation on whether the testing business of the issuer conforms to the national automobile testing standards; whether the issuer's personnel are required to obtain professional qualification and work with certificates to carry out the inspection and evaluation business and extended warranty business; whether the extended warranty service provided by the issuer belongs to the part-time insurance agency behavior regulated by the measures, and whether the issuer is actually engaged in insurance concurrent business Agency; according to the business development process and the legal relationship between the main bodies, as well as the industry status that the extension of warranty and insurance behavior can be separated in practice, this paper explains whether the issuer's extended warranty service belongs to the direct insurance behavior; it also explains whether the issuer has forged or altered the vehicle registration certificate and other documents to prove the specific vehicle model, so as to carry out the extended warranty business Whether it complies with the provisions of insurance law, measures and other relevant laws and regulations, and whether it is beyond the business scope of the license.

The reporter of 21st century economic report noted that in the latest version of the prospectus (the draft for the meeting), Huaao Automobile Co., Ltd. gave the relevant statement as "the issuer holds the insurance concurrent business agency business license, but has not actually carried out the insurance concurrent business agency business" during the report period.

The reporter noted that the owner is Hua'ao automobile, and the insurance concurrent business agency license with the number of 110105680456932003 is valid on July 4, 2020, and has expired at present.

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