The actual controller of Shenzhen Damai's parent company is under investigation

When it comes to Shenzhen Big Selling Chain, people know more about its quarrel with its parent company, Xunxing Shares. While other big sellers' performance is rising steadily, it has frequently been in the spotlight because of the quarrel with its parent company.

It has attracted widespread attention again recently, but this time it is because the actual controller, controlling shareholder and major shareholder of its parent company were investigated.

The China Securities Regulatory Commission took action and the actual controller and controlling shareholder were investigated

On the evening of December 7, Xunxing Shares issued three announcements in a row stating that the company's actual controller Wang Lijun, controlling shareholder Tianjin Huizefeng Enterprise Management Co., Ltd. and shareholder holding more than 5% of the shares Fujian Xunxing Group Co., Ltd. received the "Notice of Case Filing" from the China Securities Regulatory Commission . The former was suspected of manipulating "Xunxing Shares" and the latter two were suspected of illegal and irregular information disclosure. The three were filed by the China Securities Regulatory Commission on December 4.

After the announcement was issued, on December 8, Xunxing shares' stock price plummeted as soon as it opened, reaching a low of 6.36 (6.97 the day before), a drop of nearly 6%. However, yesterday (December 11), the wind direction suddenly changed, and the stock price soared 10.03%, directly hitting the daily limit, and finally closed at 7.24 yuan per share. Its current total market value is about 2.6 billion yuan.

Regarding this matter, the secretary of Xunxing Co., Ltd. responded on the investor interaction platform: "The actual controller's manipulation of stocks is his personal behavior and has nothing to do with the company. The company is not clear about how it was implemented. The CSRC's investigation into the suspected information disclosure of the controlling shareholder and major shareholder announced yesterday is the same as the investigation into the suspected information disclosure of listed companies in 2018 .

Since suspected stock manipulation is a criminal offense, the case was transferred to the public security department for investigation in 2019. After the criminal case was closed, the administrative investigation resumed. So I understand that the investigation announced yesterday is not a new investigation, but a continuation of the investigation in 2018. "

It is reported that in October 2018, the China Securities Regulatory Commission issued an investigation notice to Xunxing Co., Ltd., and the company was investigated by the China Securities Regulatory Commission for suspected illegal and irregular information disclosure.

Regarding this investigation, on November 24, Xunxing Co., Ltd. disclosed that the investigation by the CSRC is still ongoing and has not yet received any conclusive opinions or decisions from the CSRC.

Now it seems that this is a new case against the violation. Previously, the target was only the company, but now the major shareholder must also bear the corresponding responsibility. In this regard, the secretary of the board of directors of Xunxing Co., Ltd. also stated on the investor interaction platform that the CSRC filed a case after investigating and believing that the major shareholder was responsible, and it was not a new problem with the company's standardized operation.

As for Wang Lijun, he was arrested by the Chongqing Municipal Public Security Bureau on suspicion of insider trading in August 2019. In March 2022, Xunxing Co., Ltd. announced that it had received a notice from its actual controller Wang Lijun, and learned that Wang Lijun had recently received a "Decision on Non-Prosecution" issued by the First Branch of the Chongqing Municipal People's Procuratorate.

Xunxing Co., Ltd. stated that after review by the First Branch of the Chongqing Municipal People's Procuratorate, it was considered that Wang Lijun's crime was minor and he had surrendered himself. According to the relevant provisions of the Criminal Law and the Criminal Procedure Law, no punishment was required, and it was decided not to prosecute Wang Lijun.

Currently, Wang Lijun indirectly holds 24.98% of Xunxing shares through Tianjin Huizefeng , but does not hold any position in the company. Xunxing Group holds 15.61% of the shares, making it the company's second largest shareholder.

With no progress in six years, is the cross-border e-commerce business going to die out?

In fact, Wang Lijun is not the founder of Xunxing Co., Ltd. In 2016, he acquired 25% of the shares from the founder Shi Nengkeng's family and became the new actual controller of Xunxing Co., Ltd. He has been the chairman of the company since February 2017.

Although he served in the company for only two and a half years, he single-handedly facilitated the acquisition of Shenzhen Damajiazhilian. Currently, cross-border e-commerce business accounts for 14.04% of its total revenue.

In December 2006, Xunxing Co., Ltd. was listed on the Shenzhen Stock Exchange and was known as the "first zipper stock". In 2017, Xunxing Co., Ltd. acquired 65.00% of the equity of Jiazhilian held by Gan Qingcao and 21 other shareholders for a cash consideration of 1.014 billion yuan.

However, in recent years, the development of Xunxing's cross-border e-commerce business has been unsatisfactory. In 2016, Jiazhilian achieved a revenue of 457 million yuan and a net profit of 59 million yuan. In 2022, Xunxing's cross-border e-commerce business achieved operating income of only 412 million yuan, and even turned from profit to loss . Six years later, the performance has not improved but declined.

However, the situation seems to have improved this year. The financial report shows that in the first half of this year, Xunxing Co., Ltd. achieved operating income of 917 million yuan and net profit attributable to the parent company of 60.96 million yuan. Among them, the cross-border export e-commerce business achieved operating income of 128 million yuan and net profit attributable to the parent company of -2.31 million yuan, with a significantly narrowed loss year-on-year .

Jiazhilian's e-commerce business does not have its own sales platform, and mainly realizes export B2C sales through third-party platforms such as Amazon. However, all products sold are private brands. The categories of private brand products cover household living supplies, health and beauty products, 3C electronic products, automotive peripheral products, other products and other fields.

In the first half of 2023, the revenues of the above five categories were RMB 53.816 million, RMB 18.491 million, RMB 32.5368 million, RMB 6.5996 million and RMB 7.7495 million, respectively, accounting for 45.15%, 15.51%, 27.30%, 5.54% and 6.50% of the total e-commerce business revenue for the whole year.

Like most big sellers, the main sales platform of Jiazhilian is also Amazon. It is reported that more than 64.33% of the inventory of Jiazhilian is stored in Amazon FBA warehouses, mainly distributed in the United States, the United Kingdom, Japan and other regions, and another 35.67% of the inventory is stored in temporary turnover warehouses rented in the United States, the United Kingdom and Japan. In the first half of 2023, a total of warehousing costs of 4.0118 million yuan were incurred.

Cross-border acquisitions leave a bad debt, but Price Chain will continue to operate

Many people in the industry have heard about the gambling between Jiazhilian and Xunxing Shares on the listing. Today, this is still a bad debt.

In 2017, cross-border e-commerce was developing rapidly, and capital rushed into this field. At this time, Gan Qingcao and Zhu Ling made a decision to sell part of the company's equity to Xunxing Shares, an A-share listed company, to achieve a backdoor listing. In the end, they got what they wanted, and Jiazhilian became an A-share listed cross-border e-commerce company.

However, the operating environment of Jiazhilian continued to deteriorate after the acquisition. The actual net profit after deducting non-operating expenses in 2017-2019 was only RMB 96.8596 million, -RMB 75.8942 million, and -RMB 62.0897 million, respectively, all of which failed to meet the performance commitments.

From then on, the two sides began to tear each other apart.

In the end, Xunxing Co., Ltd. won a comprehensive victory in the performance commitment compensation arbitration. However, it stated that because Gan Qingcao and Zhu Ling concealed their property and fled abroad, they refused to execute the effective ruling; except for the three assets of 129 million bank deposits that have been executed, 31.337% of the equity of Price Chain pledged to the company, and 2,126,036 shares of the company held by Gan Qingcao, the company does not have other property information of the performance compensation party, which constitutes an obstacle to further execution.

In response to this, Xunxing Co., Ltd. set up a special debt collection team.

Even though Jiazhilian has not yet achieved profitability as of the first half of 2023, it has not become the "abandoned child" of Xunxing Co., Ltd.

Not long ago, Xunxing Co., Ltd. stated on the investor interaction platform that cross-border acquisitions are a challenge for the company. During the performance betting period from 2018 to 2020, the founding team of Jiazhilian was responsible for the operation and suffered huge losses. After the three-year performance audit was completed, considering the asset security risks, the company took back the operating rights in July 2021. The large-scale resignation of the original management team to set up competing companies caused turbulence and affected the annual operating performance; in 2022, the change of Amazon platform policy and the closure of stores during the peak season affected sales and formed inventory, which was the main reason for the loss that year; in 2023, there were initial results in clearing inventory, reducing costs and increasing efficiency. At present, the management team is still exploring business strategies and is not considering selling for the time being.

Chain of Value