Shenzhen Dama wins the game! Wins another lawsuit

The litigation dispute between Xinghui Co., Ltd. and Sun Caijin, the original founder of Zebao, has always attracted a lot of attention in the industry. Recently, another litigation dispute has made new progress.

First-instance judgment on Xinghui shares performance bonus lawsuit

Shenzhen Zebao Technology's parent company Xinghui Holdings has released an announcement on the latest progress of the performance bonus lawsuit .

The story of this case started in November last year.

At that time, Xinghui Co., Ltd. received the "Subpoena" , "Notice of Evidence" and other relevant materials delivered by the People's Court of Longhua District, Shenzhen . The plaintiff Sun Caijin and six others sued Xinghui Co., Ltd. and Zebao Technology, requiring both parties to pay the plaintiffs' excess performance rewards, case acceptance fees, etc., totaling 26.801 million yuan.

According to the progress announcement on the lawsuit released by Xinghui Co., Ltd., the first instance of the case has been decided, and the result is: all the plaintiffs' claims are dismissed , and the case acceptance fee of 175,805 yuan and the preservation fee of 5,000 yuan shall be borne jointly by the six plaintiffs.

Why did the plaintiff Sun Caijin and others sue Xinghui Shares and Zebao Technology? This has to do with the gambling agreement a few years ago.

In 2018, Xinghui Shares negotiated with the founder team of Zebao to acquire Zebao, whose market value exceeded that of Xinghui Shares at the time, and set a merger transaction price of 1.53 billion yuan. As an additional condition, the two parties signed a three-year performance betting agreement, requiring Zebao to achieve net profits of no less than 108 million yuan, 145 million yuan and 190 million yuan in 2018, 2019 and 2020 respectively. It is promised that after the performance reaches the target, the original founder team of Zebao will be awarded corresponding performance rewards.

Zebao has lived up to expectations and completed the gambling agreement for three consecutive years, doubling its performance. The net profits in 2018-2020 were 109 million yuan, 154 million yuan and 247 million yuan respectively. According to the agreement, Sun Caijin's team should receive at least 26.4712 million yuan in bonuses.

However, Xinghui shares did not pay the performance bonus as required until 2023. Therefore, Sun Caijin's team took Xinghui shares to court, demanding that it pay the plaintiff's excess performance bonus, case handling fees, etc., totaling 26.801 million yuan.

Why was the lawsuit ultimately dismissed?

This may be related to several other litigation disputes between Xinghui Co., Ltd. and Sun Caijin's team .

In 2022, Xinghui Co., Ltd. sued Sun Caijin's team, accusing them of manipulating Zebao Technology's business model and evading taxes in order to complete the gambling agreement, resulting in the closure of several Amazon stores under Zebao. In the past few years, Zebao's overseas subsidiaries have been pursued for taxes by the US, German, and French tax authorities, and the total amount of unpaid and overdue taxes has reached 50 million yuan.

The most recent lawsuit was in April 2024, when Xinghui Holdings' subsidiary Zebao Technology again sued Sun Caijin and four others in court on the grounds of "corporate interest and liability disputes ."

In the facts and reasons of the lawsuit, Zebao Technology mentioned that the defendants Sun Caijin and other four people took advantage of their positions to engage in a number of illegal and irregular behaviors during their tenure at Zebao Technology, causing serious economic losses to Zebao Technology. Based on this, Zebao Company requires the defendants to jointly compensate Zebao Technology for losses exceeding RMB 240 million for their dereliction of duty, and jointly bear the litigation fees, preservation application fees, preservation insurance premiums and other litigation expenses in this case.

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 it released , 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.

However, in this lawsuit between Xinghui Shares and Sun Caijin 's team, Xinghui Shares has regained a game. And according to the official data recently released by Xinghui Shares , as of May 28, 2024, the company and its subsidiaries have not yet disclosed the cumulative amount of small lawsuits and arbitration matters of RMB 4.7471 million, accounting for only 0.84% ​​of the company's latest audited net assets. Litigation and arbitration matters have obviously decreased, which can be regarded as a good trend.

Why has Xinghui Shares suffered losses for three consecutive years?

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

According to the financial report data released by Xinghui Co., Ltd. some time ago , the total operating revenue in 2023 was 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 , the loss situation has been alleviated, but it still failed to achieve profitability.

Regarding the company's performance loss, 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 legacy issues. 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.

This is not the first time that Xinghui shares have suffered losses.

Since 2021, Xinghui Co., Ltd.'s revenue has been declining and has been in a loss-making state .

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.

When Xinghui Co., Ltd. released its 2023 financial report, it mentioned that the recovered taxes had an adverse impact on the company's operating performance .

On January 31, 2024, Xinghui Co., Ltd. issued an announcement stating that the company had received a tax payment notice from the Italian tax department. Its subsidiary SKL had failed to pay VAT in full from 2017 to 2021. The total taxes and fines now total 6.4245 million euros (equivalent to approximately RMB 49.56 million).

Moreover, this is not the first time that Xinghui Co., Ltd. has received a tax payment notice.

On January 11, 2024, STK received a tax payment notice from the U.S. tax department, stating that it had failed to pay full taxes from 2016 to 2021. The total amount of taxes and fines was US$2.3784 million (equivalent to approximately RMB 17 million at the time).

Combined with the two most recent tax payments, in less than a month, the total amount that Xinghui Co., Ltd. needs to pay is more than RMB 60 million.

And because of these two taxes, Xinghui Co., Ltd. included them in the 2023 annual profit and loss, with the amount reaching 18.3275 million yuan, which is also one of the reasons for the loss .

In general, 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

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