Tagged: A-share market

US Securities and Exchange Commission shot

Luckin Coffee’s financial fraud case has finally made new progress! On December 17, Beijing time, the US Securities and Exchange Commission (SEC) announced that Luckin Coffee agreed to pay 180 million US dollars (about 1.18 billion yuan) to settle its accounting fraud allegations.

1.18 billion sky-high fines

Reach a settlement

The official Weibo of Luckin Coffee issued a statement on December 17, stating that Luckin Coffee and the SEC have reached a settlement on the alleged financial fraud by some former employees. The company and stores are currently operating stably and normally.

lUCKIN

On December 16, the U.S. Securities and Exchange Commission (SEC) announced that Luckin Coffee had previously seriously misreported the company’s revenue, expenses and net operating losses in order to deceive investors in an attempt to make it look like it had achieved rapid growth and improvement. To improve profitability and meet the company’s profit expectations. Faced with this allegation, Luckin Coffee agreed to pay a fine of 180 million U.S. dollars to settle the commission’s allegation.

The US Securities and Exchange Commission alleged in the indictment that at least between April 2019 and January 2020, Luckin Coffee used three independent purchase plans to use related parties to falsify sales transactions, deliberately fabricating more than 300 million Retail sales in dollars. The indictment alleges that some employees of Luckin Coffee tried to conceal their fraudulent activities by inflating company expenses by more than US$190 million to create a false operating database, and tampering with accounting and banking records to reflect fraudulent sales.

The incident originated from the “self-destruction” incident of Luckin Coffee. In April this year, the Ruixing Coffee Thunderstorm staged an unprecedented self-destruction, announcing the existence of forged transactions from the second quarter to the fourth quarter of 2019, involving sales of approximately 2.2 billion yuan. The company’s board of directors has established a special committee to investigate issues during the fiscal year 2019 audit period. Subsequently, Ruixing Coffee’s stock price crashed at the fastest speed, with 5 blows in 40 minutes, the stock price plummeted 78%, and the market value of more than 30 billion evaporated. At that time, many law firms in the United States also initiated a class action lawsuit to accuse him of violating the US securities laws and making false and misleading statements.

On June 29, Luckin Coffee officially ceased trading on the Nasdaq exchange, entered the delisting process, and ended the 400-day listing journey. Luckin Coffee’s stock price was fixed at $1.38 per share, compared to the listing. At the time the issue price of $17 was reduced by 90%.

On July 1, Ruixing Coffee announced on its official website that the company’s internal investigation was basically completed. The special committee of the board of directors found that the financial fraud began in April 2019. The company’s 2019 net revenue was exaggerated by about 2.12 billion yuan, costs and expenses It was exaggerated by 1.34 billion yuan in 2019. At the end of July, the official also officially disclosed the progress of the investigation into the financial fraud incident of Ruixing Coffee. The inspection found that from April 2019 to the end of 2019, Ruixing Coffee Company increased the transaction volume by 2.246 billion yuan through the fictitious commodity certificate business, an inflated increase Revenue was 2.119 billion yuan, inflated costs and expenses were 1.211 billion yuan, and inflated profits were 908 million yuan.

 

The moat did not collapse

Unexpected reviews

After the fraud incident of Ruixing Coffee was exposed this year, Ruixing was pushed to the forefront. But in fact, there has not been a situation in which Ruixing’s stores have been closed, fans are angry and the company has drastically laid off employees and is on the verge of bankruptcy. However, in the 8 months since the thunderstorm, most of the Luckin coffee stores around me were still operating normally, and the App can also place orders normally. Now, you can see Luckin’s Christmas cute coffee posters outside many stores. It can be seen that Luckin’s store operations look normal.

Ruixing is also organized within the company. More than 4,000 Ruixing stores across the country are operating as usual, more than 30,000 employees are also on time, and the number of new users is constantly increasing. Luckin’s management predicts that it will achieve overall profitability in 2021.

 

Turning to the consumer side, it seems that the Ruixing thunder incident, consumers are not “cold.” Although Luckin Coffee has been condemned as a liar in the capital market, it cannot shake Luckin Coffee’s status as the “first cost-effective coffee” in the minds of consumers. Since reporting financial fraud incidents, Luckin’s focus has shifted to operating users and focusing on product development. At the same time, it has also played social marketing and shared coupons at fixed points, which has activated many new and old users and improved user stickiness. .

When Ruixing Coffee’s official Weibo issued a statement, netizens’ comments were also “stand in line” Ruixing.

 

Some netizens also recommend Luckin Coffee products in the comments. Some netizens even said, “The coffee is good and it’s over. Consumers don’t care about these things.” It can be seen that Luckin’s thunder in the capital market has not affected consumers’ reviews of it, and even cheered for it. Cheer up. Luckin’s counterfeiting incident may allow it to return to its original intentions, sink its heart to develop new products, focus on consumers, and continue to create value for consumers. It seems that this time Ruixing “will not die, there must be good luck.”

 

Warning to the domestic market

Although consumers are not “cold” about Ruixing Coffee’s financial fraud, this time the SEC’s astronomical fine on Ruixing has sounded a wake-up call to the domestic capital market. In recent years, Ruixing Coffee’s self-destructive behavior seems to be regarded as “pediatrics” compared with A-share Kangmei Pharmaceutical and Kangdexin fraud. It seems that words such as fraud and fraud are not uncommon for China’s capital market.

In the United States, financial fraudsters can be fined $5 million and imprisoned for 25 years. Compared with China, the punishment for counterfeiting is much gentler. In the new securities law, those who have not issued securities will be fined not less than RMB 2 million and not more than 20 million yuan; those who have issued securities will be fined 100% of the illegally raised funds. A fine of more than tenths and less than one time. The directly responsible person in charge and other directly responsible persons shall be fined not less than one million yuan but not more than ten million yuan.

In such a comparison, the false disclosures of listed companies that have been repeatedly prohibited in the A-share market are not without reason. The Ruixing Thunder incident also served as a warning for domestic listed companies and the entire domestic capital market.

Rendong Holdings has been suspended from financing purchases

The trend of Rendong Holdings may be a mystery in the A-share market this year.

On December 15, Rendong Holdings, which had a limit of 14 consecutive days, broke the limit and staged the “Earth and Sky Board”. As of the close, the share price of Rendong Holdings has risen 10.03% to 15.14 yuan, with a total market value of 8.477 billion yuan, which has evaporated 27.7 billion yuan from its high.

illustration

Rendong Holdings announced in the evening that the shares of Tokyo Foundation Group Co., Ltd. were reduced by 10.56 million shares through a centralized bidding, accounting for 1.88% of the total share capital. The average price of the reduction was 15.14 yuan per share, that is, the daily limit price; it was on April 13 Today, it has reduced its holdings by 11.829 million shares, accounting for 2.11% of the total share capital. The reduction method is all through centralized bidding.
The turnover of 2.1 billion in 1 minute, where does the mysterious funds come from?

Today, Rendong Holdings still opened with a lower limit, but it was divided into a watershed at 9.32, and the turnover instantly exceeded 2.1 billion yuan.

During the call auction stage, Rendong Holdings sealed the price limit with more than 1.6 million lots. At 9:32, a huge amount of funds of over 1.7 million hands suddenly entered the market, took all the sell orders, and took 39 seconds to push Rendong Holdings to the limit.

Rendong Holdings has been suspended from financing purchases, so where does this mysterious fund of 2.1 billion come from?

After-market data showed that the top five business departments bought a total of 681 million yuan, of which, Everbright Securities Foshan Lvjing Road bought 359 million yuan, Haitong Securities Shenzhen Branch Huafu Road business department bought a net 135 million yuan; BOC International Securities The Shanghai Xinhua Road Securities Business Department of Co., Ltd. and Caitong Securities Co., Ltd. Qingdao Branch sold about 300 million yuan. Among them, the business department of Everbright Securities Foshan Lvjing Road is called “Foshan Wuyingjiao” in the industry, and it is the top hot money. Its main seats also include the business department of Everbright Securities Foshan Jihua 6th Road. It relies on its own large capital advantage and ultra-short-term Operate strategies to quickly arbitrage in the market.

According to Wind data, as of December 14, Rendong Holdings had a financing balance of nearly 3 billion yuan, accounting for more than 38% of the total market value in circulation, involving securities companies and 18 brokers. Except for Guorong Securities 45%, the financing margin ratio of the remaining 18 companies is 100%. The margin ratio for securities lending varies greatly, with China Merchants Securities and Nanjing Securities being 110% and 100% respectively, and Huatai Securities, CITIC Securities, and Huabao Securities at 50% to 75%.

Rendong Holdings stated this evening that Rendong Tianjin, the company’s controlling shareholder, acting in concert with Rendong Information, received a notice from CITIC Construction Investment that Rendong Tianjin’s two integrations with CITIC Construction Investment will continue between December 15 and 18. Upon expiration, if Rendong Tianjin fails to repay all the liabilities before the contract expires, China Securities Investment Corporation will perform a mandatory liquidation based on the market and trading conditions after the contract expires. At the same time, Rendong Information’s two financing businesses in Minmetals Securities Co., Ltd. may trigger a forced liquidation due to the recent sharp fluctuations in stock prices.

Earlier, due to 14 consecutive price limits and loss of individual stock liquidity, the impact of Rendong Holdings’ plummet has spread to brokerages. According to industry insiders, Rendong Holdings’ two financings are mainly concentrated in some securities, which has a great impact on concentrated securities firms.

According to media reports, Jufeng Investment Co., Ltd. believes that Rendong Holdings unexpectedly opened the market today, and the brokerage crisis will obviously be alleviated. Chuancai Securities analysts believe that today’s prying board is a self-rescue behavior. There are a lot of institutional funds trapped by Rendong Holdings, especially the passive loss financing.

The Shenzhen Stock Exchange previously named “mysterious shareholders” and asked for self-inspection of whether transactions violated regulations

Just yesterday evening, the Shenzhen Stock Exchange issued a letter of concern, requesting Rendong Holdings to explain whether Chongzuo Zhongshuo’s establishment time, reasons, shareholding structure and actual controller status are required to perform information disclosure obligations; Chongzuo Zhongshuo is the first The specific circumstances of the transaction starting to buy and sell the company’s stock, explain the institution’s source of funds, and self-examine whether there are violations of laws and regulations in the relevant transactions.

According to its three quarterly reports, Chongzuo Zhongshuo holds a total of 3.55% of Rendong Holdings. According to Qixinbao, after the equity penetration, the actual controllers of Chongzuo Zhongshuo, Wang Shishan, Huang Hao, and Liu Changyong, are themselves the directors and executives of Rendong Holdings.

Coincidentally, the time when Chongzuo Zhongshuo was established was very close to the time when the share price of Rendong Holdings climbed. Chongzuo Zhongshuo bought Rendong Holdings in the fourth quarter of 2019, and only held one A-share of Rendong Holdings.

As of the end of the first quarter of this year, Chongzuo Zhongshuo held 21.094 million shares of Rendong Holdings, accounting for 3.77% of the total equity of listed companies. At that time, the market value of its holdings was close to 500 million yuan. During this period, the share price of Rendong Holdings has climbed, with a cumulative increase of nearly 50%. Since then, Chongzuo Zhongshuo began to reduce its holdings in Rendong Holdings, which has reduced its holdings of 1.22 million shares in the third quarter.

Currently, the market is waiting for a response from Rendong Holdings, involving the time of Chongzuo Zhongshuo’s first transaction, source of funds, and senior management team.

At the beginning of December, Rendong Holdings was confirmed as “Zhuanggu.” Some media quoted regulators as saying that the dealer of Zuozhuang Rendong Holdings has been controlled by the police. In addition, Li Yuezong, a capital tycoon engaged in OTC and virtual disk trading, has been controlled by the Pudong police, and Li Yuezong is likely to be highly related to Rendong Holdings.