Involved in a debt crisis, SHEIN was sued by Cross-Border Communications!

SHEIN has always been a low- key brand, but it has been repeatedly pushed into the spotlight and has become one of the top brands in the cross-border circle. Recently, SHEIN has once again become the focus of the cross-border circle, but this time it is not good news...

SHEIN is sued for debt scandal

Recently, Cross-Border Link released the "Announcement on the Reply to the Shenzhen Stock Exchange's Letter of Concern". This announcement shows that as of now, Cross-Border Link has not received remittances of 615 million yuan through the sale of Paton's shares .

Last year, Cross-Border Communication announced that it would sell the equity of its subsidiary Patonson for RMB 2.02 billion. Now, nearly a year has passed, and Cross-Border Communication has not received more than 30% of the payment. In response, Cross-Border Communication has filed a lawsuit against some companies that have not paid in full, and SHEIN is one of them.

According to the announcement, Xiamen Yiwei Yihang Investment Partnership (Limited Partnership) and Guangzhou Shein International ( SHEIN) have not yet paid a total of 53 million yuan for equity transfer; Shenzhen Patuo Brand Investment Partnership (Limited Partnership), Shenzhen Yongpa Investment Partnership (Limited Partnership), Shenzhen Yongxun Investment Partnership (Limited Partnership), etc. have not yet received a total of 326 million yuan; ACHIEVER VENTURES III (HONG KONG) LIMITED (Shunwei US Dollar Fund) has not yet received a total of 236 million yuan.

Among them, the payment period for the 326 million yuan repayment from Shenzhen Patuo Brand Investment Partnership and other companies has not yet expired. Shunwei US Dollar Fund requested to terminate the previous acquisition agreement . The reason given by Shunwei was: "In view of the fact that the main business of the target company had undergone major adverse changes before May 17, the prerequisites stipulated in Article 3.2.2 of the Equity Transfer and Capital Increase Agreement have not been met until the expiration of the period stipulated in Article 7.1.3 of the agreement. We hereby notify you to terminate the Equity Transfer and Capital Increase Agreement." This is most likely referring to the incident in which Patuo was blocked by Amazon in large numbers last year.

After the account suspension incident, Paton's business suffered a major blow, and Shunwei was naturally unwilling to take over at this time. Cross-border Communication did not agree with Shunwei's decision. Cross-border Communication has replied to Shunwei, stating that all other parties to the sale of Paton have paid in accordance with the contract, and only ACHIEVER VENTURES III (HONG KONG) LIMITED requested to terminate the agreement. The company did not agree and hoped that the two parties would maintain effective communication and resolve the Paton equity transfer issue as soon as possible. It also stated that if no consensus can be reached with Shunwei in the future, it will be resolved through legal means.

In addition, the announcement of Cross-Border Link also stated that for the total of 53 million yuan that has not yet been paid back to Xiamen Yiwei Yihang Investment Partnership (Limited Partnership) and Guangzhou Xiyin International Import and Export Co., Ltd. , the company has filed a lawsuit with the court, urging the other party to pay the equity transfer payment as soon as possible. The first-instance judgment has not yet been made.

With annual sales of 100 billion, why hasn't SHEIN paid the transfer fee yet? There has been no official response from SHEIN so far, and we don't know the specific reason. However, it is sad that a share transaction case ended up in court.

Cross-border Communication sells its shares in Paton, with Xiaomi, SHEIN and others as transferees

In January 2021, Cross-Border Link issued the "Announcement on the Proposed Sale of Equity of Subsidiaries and the Signing of a Framework Agreement", stating that it would sell no less than 60% of Paton's equity.

Just two months later, Cross-Border Link issued the " Announcement on the Sale of 100% Equity of a Subsidiary and Related Transactions", stating that it planned to transfer its 100 % equity in Paton for RMB 2.02 billion.

At that time, the transferees of the equity transfer could be divided into two major camps, namely the management transferees mainly including Patuo Investment, Yongpa Investment, Yongxun Investment and Pachi Investment, and new investors including Xiaomi and Xiyin International.

As soon as the news of Cross-border Communication's announcement of selling Paton was announced, it caused heated discussions in the cross-border circle. Why did Cross-border Communication sell Paton, which it acquired in four batches for a total of 1.027 billion yuan? Did Cross-border Communication lose or gain?

In response to this, Cross-border Communication gave the following response:

Cross-border Link's performance declined in 2019 and it has faced a severe external financing environment since 2020. This transaction aims to recover cash to fill the working capital gap and repay debts to enhance the company's short-term and long-term debt repayment capacity.

In recent years, the problem of Cross-border E- commerce's funding needs has become more prominent . On the one hand, it is due to the active expansion of its main business. Cross-border e-commerce business requires sufficient operating funds for marketing promotion, inventory turnover, and supply chain construction. On the other hand, the company has successively invested in many high-quality companies in the industry such as Paton, and the operating funds have been converted into investment funds.

In order to solve the problem of capital demand, Cross-border Communication has raised funds through various means such as issuing corporate bonds, bank loans, shareholder loans, etc. Over the years, external financing has gradually increased the company's debt pressure, and its short-term and long-term debt repayment capabilities have shown a downward trend.

At that time, it seemed that the sale of Paton was indeed a helpless move for Cross-Border Communication. It spent 1.027 billion yuan to buy Paton and sold it for 2.02 billion yuan . In the short term, Cross-Border Communication did get a huge amount of money, but in the long run , it lost a huge source of profit .

Some of the transfer funds from the sale of Paton’s shares were directly transferred away by the pledgee without even passing through Cross-Border Link’s account.

It is reported that the first phase of equity transfer funds received by Cross-border Communication is about 919 million yuan, which has been paid directly to the pledgees through the escrow account by the acquirer according to the contract , including Fujian Zongteng Network Co., Ltd. and its affiliates, Shenzhen Lingtuo Global Logistics Co., Ltd., Shenzhen Hi-Tech Investment Group Co., Ltd., and Guangzhou Development Zone Emerging Industry Investment Fund Management Co., Ltd. The second phase of equity transfer funds should also be used to repay the debts owed under the agreement first , and the remaining part can enter the Cross-border Communication company account.

Who would have thought that nearly a year has passed, and the remaining amount of the transfer payment from the sale of Paton by Cross-Border Link to Paton is still about 615 million yuan. Among them, SHEIN, which owes the money, has recently been rumored to restart its IPO plan in the United States.

SHEIN restarts US IPO plan?

In fact, there have been more than one or two rumors that SHEIN will go public in the United States, but SHEIN has denied this statement. At the end of January this year, two people familiar with the matter said that fashion retailer SHEIN is considering restarting its IPO plan in the United States, and will go public in the United States as early as this year.

According to people familiar with the matter, SHEIN has hired Bank of America, Goldman Sachs and JPMorgan Chase to work on its IPO. It is not clear how much money SHEIN plans to raise from the IPO. However, SHEIN has once again denied this statement. A SHEIN spokesperson said that the company currently has no plans to go public and has not publicly submitted any IPO documents.

Some foreign media commented: " If SHEIN successfully lists in the United States, it will be the first large Chinese company to be listed in the United States since China began to implement stricter overseas listing rules last summer . But given the strict scrutiny of Chinese and US regulators on Chinese companies listed in New York, any IPO plans held by SHEIN may still fall through. "

SHEIN

Cross-border communication