The result has been reversed! Regulatory measures are taking swift action, with listed companies spending 700 million yuan on private equity and chairman debt burdened. Chairman | Company | Listed Company

The chairman of a debt ridden listed company surprisingly approved the company's purchase of private equity products for 700 million yuan.

On the evening of June 16th, Longxin General Motors announced that, with the approval of the company's chairman, the company has subscribed to Huarui Qianhe Jucai Selected No. 166 Private Equity Securities Investment Fund product, with a purchase amount of 700 million yuan.

This move was questioned by the exchange. That evening, the Shanghai Stock Exchange issued an inquiry letter requesting the company to verify and disclose the motives and necessity for purchasing private fund products.

It is understood that Tu Jianhua, the chairman and actual controller of Longxin General Motors, has been listed as a dishonest debtor by multiple courts due to the inability to repay a huge debt, and has not yet been fully repaid. It is worth noting that the company had already paid 700 million yuan on June 15th to purchase the private equity product Huaruiqian and Jucai Selection No. 166 Private Securities Investment Fund without convening a board decision-making process.

It is worrying that currently Longxin General Motors wants to recover the funds, but has objections to the 24-hour cooling off period with the fund manager, and has not been able to terminate the fund contract and recover all the funds within 24 hours after payment.

Listed company Haomai invests 700 million yuan to buy private equity

On the evening of June 16th, Longxin General Motors announced that, with the approval of the company's chairman, the company has subscribed to Huarui Qianhe Jucai Selected No. 166 Private Equity Securities Investment Fund product, with a purchase amount of 700 million yuan.

According to the announcement, on June 14th, the Chairman, on behalf of the company, signed the "Huarui Qianhe Jucai Selection No. 166 Private Equity Securities Investment Fund - Fund Contract" with Huarui Qianhe and Huatai Securities Co., Ltd. The company purchased Huarui Qianhe's private equity securities investment fund products with a term of one year with its own idle funds of RMB 700 million.

It is worth noting that the Fund Contract came into effect on June 15th and was approved by the Chairman. On June 15th, the full subscription amount of RMB 700 million under the contract was paid, indicating that the payment has been completed.

According to information from the China Fund Industry Association, Huarui Qianhe is a private equity fund registered in Tianjin. It was established in September 2014 and completed registration in June 2015. The number of employees is 10, and the management scale range displayed by the association is 500 to 1 billion yuan. The legal representative is Li Zirui, who previously worked as a project manager at Huawei Hisilicon Semiconductor and later as a quantitative researcher at Chengyi Qianhe Investment, entering the investment industry.

According to the announcement of Longxin General, as of May 31, 2023, Huarui Qianhe has issued 36 securities investment private equity fund products, with a total managed fund product of 1.6 billion yuan, and the latest remaining managed asset size exceeds 1.5 billion yuan. Before Longxin General Investment, the company's management scale was only 800 million yuan.

It is understood that Longxin General Investment's Huarui Qianhe Jucai Selected Series is mainly based on the "fixed income+" direction. The proportion of product investment in fixed income assets is 100%, which is the main source of income for the fund. The fund custody and service institution is Huatai Securities.

At the same time, the lock up period for a single fund share of the fund is 365 days, which means that each fund share must be held for 365 days from the date of share confirmation before it can be redeemed on open days. The stop loss line of the fund is 0.9 yuan for the net value of the fund shares.

Longxin General Motors pointed out in the announcement that the amount of this transaction is 700 million yuan, accounting for 8.96% of the company's audited net assets in 2022. However, due to the stop loss line stipulated in the Fund Contract being 0.9, its possible exposure risk is 70 million yuan, accounting for 13.27% of the company's audited net profit attributable to the parent company in 2022, exceeding 10%, which belongs to the approval authority of the board of directors.

It is concerning that Longxin General Motors pointed out in the announcement that due to objections between the company and the fund manager regarding the 24-hour cooling off period, the company was unable to terminate the fund contract and recover the full amount within 24 hours after payment. The company is actively communicating with fund manager Hua Ruiqian and fund custodian Huatai Securities regarding the recovery of subscription funds, hoping to resolve the relevant matters properly.

The chairman is burdened with debt and quickly questioned by the exchange

It is understood that Tu Jianhua, the chairman and actual controller of Longxin General Motors, has been listed as a dishonest debtor by multiple courts due to the inability to repay a huge debt, and has not yet been fully repaid.

In such a situation, such a large-scale subscription for private equity is naturally subject to inquiries from the exchange. The Shanghai Stock Exchange stated that the company's purchase of private equity investment fund products should follow the decision-making procedures of the board of directors, but the company has not yet complied. Please provide additional disclosure by the company:

1、 Has Tu Jianhua obtained authorization from the company's board of directors to purchase private equity investment funds in the name of the company, and whether the fund contracts signed between the company, Huarui Qianhe, and Huatai Securities have become effective without fulfilling the board's review and disclosure procedures;

2、 The decision-making process and main decision-makers for this purchase of private investment fund products, including specific decision-makers, participants, and executors in each stage of contract signing and payment;

3、 The financial approval and internal control system formulated by the company for investment and wealth management business, combined with the failure to comply with the board resolution in this investment, shall explain whether the relevant internal control system is sound and effective, and whether there are any defects in the implementation of the system. Meanwhile, please ask the fund custodian Huatai Securities to provide an opinion on whether the fund contract is effective.

According to the inquiry letter, Longxin Holdings, the controlling shareholder of the company controlled by Tu Jianhua, is currently in the process of bankruptcy reorganization due to insolvency. In this context, the chairman of the company, Tu Jianhua, has decided to purchase a private investment fund and has already paid the 700 million yuan subscription fee.

The Shanghai Stock Exchange stated that the company should carefully verify and disclose the motives and necessity of Tu Jianhua's purchase of private investment fund products in the name of the company, the underlying investment situation and capital flow of related products, verify whether the investment funds directly or indirectly flow to Tu Jianhua and its affiliates, and explain whether there is any capital occupation or other possible infringement of the interests of the listed company based on this.

From the performance of Private Equity Ranking Network, Huaruiqian and its products have various strategies, including index enhancement strategy, bond strategy, quantitative multi strategy, quantitative neutral strategy, and multi asset strategy. Among them, the representative product index has increased by 1, with an annualized return of 12.73% since 2019. Other strategies have performed average, with most of them less than a year old.

Industry insiders have stated that in terms of employment performance and reputation, Huarui Qianhe is not outstanding in the industry. It is rare and unexpected for the listed company to buy 700 million yuan at the first attempt, which raises questions about its investment motivation.