Longwei Media's highly leveraged acquisition case received disciplinary action from the Shanghai Stock Exchange.On the evening of October 20, the Shanghai Stock Exchange issued a disciplinary action decision, deciding to publicly condemn Zhao Wei, her husband Huang Youlong and others, and determined that they were not suitable to serve as directors, supervisors and senior managers of listed companies within 5 years.
At the same time, Kong Deyong, then chairman of Xiangyuan Culture (600576.SH, formerly known as Wanjia Culture), and Tibet Longwei Culture Media Co., Ltd. (hereinafter referred to as Longwei Media) and other directly responsible persons Zhao Zheng were also given the above-mentioned punishment.
This is another public penalty after the CSRC issued an administrative penalty decision on April 16.At that time, the China Securities Regulatory Commission decided to ban Huang Youlong, Zhao Wei, and Kong Deyong from the securities market for five years, and fined Xiangyuan Culture and Longwei Media 600,000 yuan, and fined Kong Deyong, Huang Youlong, Zhao Wei, and Zhao Zheng 300,000 yuan.
The punishment against Longwei Media began with an empty-handed acquisition.The share transfer agreement disclosed by Xiangyuan Culture on December 27, 2016—Longwei Media intends to acquire 185 million shares of Xiangyuan Culture, accounting for 29%, and the transfer price is 3.06 billion yuan.However, Longwei Media had been established for less than two months at that time, with a registered capital of only 2 million yuan, self-owned funds of only 60 million yuan, and a leverage ratio of 51 times.
Of the purchase price of 3.06 billion yuan, in addition to 60 million yuan of its own funds, 1.5 billion yuan came from borrowing from Tibet Yinbixin Asset Management Co., Ltd. (hereinafter referred to as Yinbixin), and the remaining 1.4999 billion yuan came from pledge financing by financial institutions.However, Yinbixin is a company of the Tomorrow Department. Since Xiao Jianhua, the actual controller of the Tomorrow Department, was brought to justice at the end of January 2017, he was no longer able to provide financing for this transaction, thus laying the groundwork for the variables of this transaction.
However, Longwei Media has concealed two key pieces of information during this process: first, Longwei Media’s 1.5 billion loan from Yinbixin belongs to the loan quota agreement, and has not been actually borrowed; second, there are variables in the pledged financing amount of financial institutions, not the finalized 1.4999 billion yuan, and it depends on the stock price of Xiangyuan Culture.
The subsequent direction of the transaction was astonishing - on February 13, 2017, the two parties signed a supplementary agreement, indicating that the number of shares transferred was adjusted from the original 180 million shares to 32 million shares, and the total transfer price was adjusted from the original 3.06 billion yuan529 million yuan; on February 27, the China Securities Regulatory Commission initiated an investigation into Xiangyuan Culture; on April 1, Xiangyuan Culture announced that the two parties decided to terminate the share transfer and would not hold each other accountable for breach of contract.According to the equity investment agreement originally signed by the two parties, Longwei Media should pay Xiangyuan Culture 150 million yuan in liquidated damages.
When the equity transfer plot was reversed, the stock price of Xiangyuan Culture also experienced a roller coaster - from 18.38 yuan before the suspension of trading as disclosed in the equity transfer agreement, it rose to the highest price of 25.00 yuan after the announcement of the transaction plan;After the two parties in the transaction decided to reduce the number of shares purchased, the share price of Xiangyuan Culture began to decline all the way.On the day when the administrative penalty was announced on April 16, Xiangyuan Culture’s stock price closed at 6.3 yuan. As of the evening of November 20, the company’s stock price had fallen to 4.70 yuan.
After the China Securities Regulatory Commission issued the prior notice of administrative punishment, Longwei Media and relevant parties of Xiangyuan Culture both put forward defense opinions and requested exemption from punishment.In response to the illegal facts listed by the China Securities Regulatory Commission, Longwei Media put forward five opinions, arguing that the information disclosure complies with legal requirements, and there is no hasty announcement. Xiangyuan Culture, as the subject of information disclosure obligations, has known before Longwei Media that it has not reached financing cooperation with financial institutionsIf the material information is not disclosed in time, Longwei Media has nothing to do with it.
The China Securities Regulatory Commission stated that on the one hand, Longwei Media stated in the announcement that the company’s shareholders have strong assets and sufficient repayment ability, but on the other hand, it is unable to use the repayment ability it emphasized to continue the repayment under the condition that financial institutions do not provide financing.Advance the acquisition.Therefore, Longwei Media's emphasis on the repayment ability of family assets combined with its celebrity effect has actually seriously misled the market and investors.■
