Cross-border seller seeks to recover nearly 1 billion yuan! The court ruling is here

The dispute between Xinghui Co., Ltd. and Zebao has always attracted great attention in the industry. Recently, another litigation dispute between the two parties has made new progress.

Judgment of Xinghui Co., Ltd.'s lawsuit against Zebao for shareholder dispute

Recently, Xinghui Co., Ltd. issued an announcement stating that the contract dispute case in which the company, as the plaintiff, sued Sun Caijin, Zhu Jiajia and other defendants has been decided in the first instance. The court's verdict was: all the claims of Xinghui Co., Ltd. were dismissed.

The love-hate relationship between Xinghui Co., Ltd. and Zebao began in 2018.

In 2018, Xinghui Co., Ltd. acquired Zebao Technology for RMB 1.53 billion. As an additional condition, the two parties signed a three-year performance betting agreement, requiring Zebao to achieve net profits of no less than RMB 108 million, RMB 145 million, and RMB 190 million in 2018, 2019, and 2020, respectively.

Zebao has lived up to expectations and completed the gambling agreement for three consecutive years, doubling its performance. Its net profits in 2018-2020 were 109 million yuan, 154 million yuan and 247 million yuan respectively. According to common sense, after Zebao completed the gambling, both parties should be happy.

However, the two sides had multiple lawsuits due to disputes over actual controllers and other reasons .

Xinghui Co., Ltd. has filed multiple lawsuits against Zebao's original founding team and multiple shareholding platforms. Among these lawsuits, the case with the largest amount involved is the contract dispute case mentioned above, with the amount involved once reaching 1.04 billion yuan.

In 2022, Zebao's parent company, Xinghui Holdings, disclosed an announcement about the lawsuit. The content of the announcement showed that Xinghui Holdings sued Zebao's original founders Sun Caijin, Zhu Jiajia and other stakeholders, demanding that Zebao's acquisition amount be reduced from 1.53 billion yuan to 430 million yuan, and the defendant Sun Caijin and others must return Xinghui Holdings' 1.04 billion yuan acquisition amount.

Regarding the reasons for the lawsuit, Xinghui shares stated: "During the performance commitment period, the defendant Zebao's founder and his interest group manipulated Zebao to violate Amazon's regulations in order to achieve the performance commitment, resulting in Amazon's account suspension and the company suffering huge losses."

At the same time, Xinghui Co., Ltd. also stated that the assumption in the "Appraisal Report" that Zebao "continues to maintain its original business management model and continue to operate" is no longer valid, so it requires it to return the purchase price.

In May 2024, Xinghui Co., Ltd. disclosed that the litigation request had changed and the amount of the lawsuit was adjusted to 947 million yuan.

Since the amount of the lawsuit was too large and exceeded the scope of the original Shenzhen Qianhai Court, the case was transferred to the Shenzhen Intermediate People's Court for trial. Now, in the first instance judgment, the Shenzhen Intermediate People's Court rejected all the claims of Xinghui Co., Ltd.

In response to the lawsuit involving a sum of 947 million yuan, Xinghui shares said that the company will continue to appeal. At present, it is still uncertain what the impact on the company's current or future profits will be. The specific accounting treatment and impact will be subject to the audit results of the annual review accountant.

In recent years, Xinghui shares have been involved in numerous lawsuits. In addition to the case with Yuanzebao's founding shareholder, many subsidiaries of Xinghui shares were sued by many companies for compensation for suppliers, liquidated damages and other expenses. The case lasted for a long time and ended with Xinghui losing the case and being ordered to pay suppliers more than 50 million yuan.

According to the announcement released by Xinghui Co., Ltd., as of December 25, 2023, the company's cumulative litigation and arbitration matters for 12 consecutive months involved a total amount of RMB 21.0585 million, accounting for 13.71% of the audited net assets in the latest period.

Xinghui shares' performance has been declining year after year and is facing difficulties!

In addition to the long-term litigation disputes, Xinghui’s performance issues are also worthy of attention.

Judging from the financial reports that have been released, Xinghui shares have continued to be in a loss-making state in recent years. Although the loss situation has gradually improved in the first half of this year, it is still not optimistic.

From 2021 to 2022, the operating income of Xinghui Co., Ltd. was 3.66 billion yuan and 2.351 billion yuan, respectively, a year-on-year decrease of 33.74% and 35.77%, respectively; the net profit was -1.524 billion yuan and -260 million yuan, respectively.

In 2023, Xinghui Co., Ltd. achieved a total operating income of 1.626 billion yuan, a decrease of 30.85% compared with the same period in 2022; the net profit attributable to shareholders of the listed company was -76.0925 million yuan. Although it increased by 70.77% compared with the previous year and the loss situation was alleviated, it still failed to achieve profitability.

Regarding the company's performance loss in 2023, Xinghui Co., Ltd. stated that this was mainly caused by two reasons. First, the e-commerce subsidiary received an overseas tax payment notice, which involved taxes and fines in previous years, e-commerce business operations and other losses, which affected the profit in 2023; second, historical problems. Previously, the company's e-commerce business had an early backlog of goods and a decline in sales, which affected the gross profit margin of sales. In addition, Zebao also had a certain impact on the company's performance. The main reason for the decrease in revenue was that Zebao's revenue decreased by approximately 420 million yuan.

In the first half of this year, Xinghui Co., Ltd.'s revenue was approximately 801 million yuan, a decrease of 5.62% compared with 849 million yuan in the same period last year. However, in terms of net profit, it has turned losses into profits, up 145.34% year-on-year to 9.35 million yuan. In the first half of last year, it suffered a net loss of 20.62 million yuan.

However, Xinghui’s non-GAAP net profit still performed poorly, with a loss of more than 990,000 yuan, a year-on-year decrease of 105.31%. The same period last year saw a profit of 18.69 million yuan.

It is worth noting that in the first half of this year, Xinghui’s revenue on Amazon declined.

The financial report pointed out that in the past six months, Xinghui Co., Ltd.'s revenue on the Amazon platform was 117 million yuan, which is still the largest contribution among all online channels, but compared with 262 million yuan in the same period last year, it has decreased by 55.28%, and its share in cross-border e-commerce business revenue has also dropped from 56.90% to 38.82%.

Moreover, according to the financial report data for the first half of this year, the book value of Xinghui Co., Ltd.'s stores that were blocked on Amazon was 12.6125 million yuan, and it is estimated that the bad debts cannot be recovered.

Of course, it is not just the revenue of Xinghui Shares that has changed, but also the relationship between Xinghui Shares and Zebao that should have been "close". Since 2021, the founder of Zebao has sued Xinghui Shares, and Xinghui Shares has sued the founder of Zebao, and the dispute between the two parties has never stopped.

At the same time, after the management of Xinghui Co., Ltd. took over Zebao, the management level encountered difficulties in adapting to the local environment and the loss of talent was also very serious. According to industry insiders, 90% of Zebao’s core backbones have left. One of the reasons is salary and benefits. Another major reason is that the factory-style management and cross-border e-commerce management have led to the core team not being valued. The original team members from Google and Apple have been replaced by factory people.

Under the influence of multiple factors, Zebao's future development is inevitably worrying.

It should be noted that as of June 30, 2024, the book value of goodwill of Xinghui Co., Ltd. in its acquisition of Zebao was RMB 330 million, and the company may face the risk of goodwill impairment in the future.

Long-term litigation disputes are always detrimental to the company. For the long-term development of the company, Xinghui Co., Ltd. must take positive measures to improve the company's revenue situation and enhance its ability to resist risks.

Xinghui Shares

litigation