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Dongfang Risheng, A Failed Investment Bank Intermediary?

2021/2/6 9:38:00 13

Investment BankIntermediary

          The performance of listed companies has changed after refinancing, which has attracted the attention of regulatory authorities.

        On the evening of February 1, Dongfang Risheng announced that it would suspend the listing of new convertible bonds due to the performance loss in 2020, and the project had already completed the payment of online lottery investors.

Dongfang Nisheng also became the first A-share listed company that issued convertible bonds but announced its termination.

According to investment bank sources, the main reason for the termination of Orient rison is "inter period issuance". In the concern letter of Dongfang Nisheng of Shenzhen Stock Exchange, Dongfang Nisheng has been asked to explain whether it still meets the issuing conditions after the next year based on the performance forecast or express report.

In fact, in recent years, after completing the refinancing plan, the performance of listed companies has changed suddenly, and some cases have attracted the attention of the regulatory authorities.

"This phenomenon violates the regulatory requirements for refinancing enterprises, and there are also some cases before 2018." The source disclosed to reporters that in recent years, some sponsor institutions and Baodai are "too bold", resulting in more and more problems in the refinancing market.

According to the information mastered by our reporter, the relevant departments of China Securities Regulatory Commission (CSRC) have conducted on-the-spot inspection on some listed companies whose performance has dropped sharply after the previous public offering of convertible bonds.

According to sources close to the regulator, "a lot of problems have been found and it may be necessary to deal with recommendation agencies and insurance agents.".

The first refund case

On January 28, Dongfang Risheng issued the announcement on signing the tripartite supervision agreement on raised funds, saying that the company actually raised 3.3 billion yuan in convertible bonds this time. After deducting the expenses related to the issuance, the net amount of raised funds was 3.277 billion yuan.

The fund raised by the issuance of Oriental Risheng has been fully in place on January 28, 2021.

The reversal of the story follows. On January 29, Dongfang Risheng released the performance forecast for 2020, which predicted that the company's net profit after deducting non recurring profit and loss would be - 140 million yuan to - 60 million yuan in 2020.

In a short day, the funds came and the performance changed.

The refinancing plan was thrown out in June 2020, when Dongfang Nisheng announced its 3.3 billion convertible bond issuance plan. By December of the same year, after repeated inquiries and amendments, the issuance plan was finally approved by the SFC for registration.

Before getting the approval from the CSRC, according to the third quarter performance report of Dongfang Nisheng, the company still had 351 million yuan of non net profit deduction in the first three quarters of 2020.

That is to say, in the fourth quarter of 2020, when Dongfang Nisheng convertible bond officially raised funds, the company had a loss of at least 400 million yuan after deducting non net profit.

As for the reason for the decline of performance in the fourth quarter, Dongfang Risheng explained that the gross profit margin of photovoltaic products decreased compared with the same period of last year due to the double effects of the rising prices of main raw and auxiliary materials in the upstream of modules and the decline of module sales prices. In addition, due to the appreciation of RMB against US dollar, the exchange loss caused by the conversion of foreign currency monetary items into RMB increased compared with the same period of last year.

Quite paradoxically, under the pressure of the fourth quarter performance of 2020, Dongfang Nisheng officially released a batch of documents such as roadshow announcement, issuance announcement and raising guidebook of this convertible bond issue on January 19.

On the same day, the recommendation agencies and law firms also issued relevant recommendation letters and legal opinions.

At that time, Anxin securities, which is responsible for the recommendation of Oriental Nisheng convertible bonds, said at that time that "there are sufficient reasons to believe that the issuer complies with the laws and regulations and the relevant provisions of the CSRC and Shenzhen Stock Exchange on the issuance and listing of securities.".

But in the end, the issue of convertible bonds was "stillborn" because the company deducted non net profit loss. According to investment bank sources, the main reason for the failure of Dongfang Nisheng's fund-raising is the intertemporal audit. According to regulatory requirements, listed companies issuing convertible bonds must meet the requirements of "making profits in the last two years, and the net profit is calculated based on the lower one before and after deducting non recurring profits and losses".

As for the failure to timely detect the performance change of Dongfang rising, Anxin securities explained that due to the large scale of business operation of listed companies, the number of domestic and foreign subsidiaries is large. Therefore, when the issuance of convertible bonds is started, the financial settlement and accounting data accounting of 2020 have not been completed. As a result, Anxin securities failed to timely and accurately obtain the operating performance data of Dongfang Nisheng in the fourth quarter of 2020, and then failed to express special opinions on whether the company still meets the conditions for issuing convertible bonds.

Wu zetao, senior partner of Bank of China law firm in Beijing, also believes that there is no evidence to prove that Dongfang Risheng has financial fraud. At present, the situation of Anxin securities can not constitute false records, misleading statements or major omissions stipulated in the securities law and the administrative measures for securities issuance of listed companies.

Whether Anxin securities has touched the "legal net" still needs further information; Some people in the industry pointed out that whether Anson securities as a sponsor institution is diligent and responsible is still questionable.

A bond underwriter of a medium-sized securities firm in northern China said that the financial data of convertible bonds issued by listed companies is valid for six months, and the financial report information consulted by the sponsor can be disclosed to September 30, so it is reasonable for Anxin securities to make the above judgment.

"However, although the report is released in the first quarter, the sponsor can easily understand what the daily order of the enterprise is like. It is fully capable of detecting the changes in the daily situation of the enterprise. Anson securities can not be said to be fully diligent and responsible."

Multiple investment banks involved in sudden change of performance

The 21st century economic report reporter research found that in recent years, the performance of listed companies before and after issuing convertible bonds is not uncommon, which is also the main reason for the regulatory authorities to start on-site inspection of some projects recently.

Although the issuance has not been "blown up" due to performance problems, it is difficult to say that the substantial fluctuations in the performance of relevant listed companies before and after the issuance of bonds have not harmed the interests of market investors.

According to the incomplete statistics of 21st century economic report, there are 8 A-share listed companies' performance before and after the issuance of convertible bonds since 2020.

On January 30, sannuo bio released the performance forecast for 2020. The company expected to realize the net profit of 175 million yuan to 201 million yuan attributable to the shareholders of the listed company in the current period, while the net profit attributable to the shareholders of the listed company in the first three quarters of the company was 249 million yuan, with a year-on-year increase of 17.02%.

In other words, in the fourth quarter of 2020, sannuo bio lost about 48 million yuan to 74 million yuan.

On December 17, sannuo bio just released the announcement of issuing convertible bonds to unspecified objects. As of December 25, 500 million yuan of convertible bonds raised by this issue had been in place, and the "sannuo convertible bonds" issued by the company was officially listed on January 12.

All this happened in the fourth quarter of the year when the company's performance was suddenly losing money.

Similar to sannuo bio, Weitang industry also suffered losses in the fourth quarter recently.

In the third quarter, the net profit attributable to shareholders of listed companies increased by 29.84% over the same period of last year, and the maximum loss of 7.14 million yuan was expected in the fourth quarter of 2020, and the "Weitang convertible bonds" issued by the company was also issued on December 11, last year.

According to our statistics, in addition to the above two companies, Xinjiang Jiaojian, Xuerong biology, Tianmu Lake, AORUIJIN, jinyinhe, bitchuang technology and other A-share listed companies also have "changed face" after the issuance of convertible bonds.

For example, in 2020, Xinjiang Jiaojian achieved a net profit of 97.97 million yuan attributable to shareholders of listed companies, with a year-on-year increase of 1437%. However, the growth rate of net profit in the first three quarters of that year slowed down to 42.58%, and the actual loss in the third quarter was 15.32 million yuan. The company's convertible bond "Jiaojian convertible bond" was officially issued in mid October before the financial data of the third quarter report was disclosed.

For the above performance changes, 21st century economic reporter also called the relevant listed companies.

The person in charge of the relevant listed companies responded that the decline in performance was mainly caused by various non cash flow items which were mainly withdrawn. The company has been preparing to issue convertible bonds since March 2020, when it was officially issued, the company encountered a decline in performance“ There will certainly be some amortization of expenses in the issuance of bonds. In 2020, the company has also made provision on expenses, which will also affect the income statement in 2020. "

Other companies also told reporters that the correlation between the issuance of convertible bonds and the company's performance was low, "meeting the conditions for issuing convertible bonds" and "the impact on investors is not great".

In this regard, a senior investment banker in Beijing pointed out to the 21st century economic reporter that the sharp fluctuations in the performance of listed companies may be caused by multiple factors, which can not be simply judged as performance fraud. As long as the enterprise can fully disclose the reasons, it will not affect the market's view on it. But when it comes to refinancing, the company's information disclosure needs to be more careful and sufficient.

"In this process, the sponsor didn't notice the change of the enterprise, and submitted information to the regulatory authorities, so that the company's performance losses were exposed only after the completion of financing, which could not be called diligence and due diligence," the person said.

Among the 8 listed companies whose performance has changed after the issuance of convertible bonds, 7 securities companies have been involved.

Among them, two convertible bond issuance projects were sponsored by China Securities construction investment, and one was sponsored by CITIC Securities, Guojin securities, Anxin securities, Changjiang Securities, Minsheng securities and Zhongtian Guofu securities.

Facing the problems of refinancing of listed companies, supervision has also been taken. According to the 21st century economic report, a few days ago, the Agency Department of China Securities Regulatory Commission (CSRC) conducted on-the-spot inspection on some listed companies whose performance dropped sharply after the previous public offering of convertible bonds. Close to the regulator disclosed that, "found a lot of problems, may have to deal with the recommendation agencies and insurance agent."

"Most of the time, investment banks still have a fluke mentality. After all, they usually check to the declaration date or the feedback date. Such performance changes belong to" after period "matters. We generally require enterprises to provide financial statements every month and report any problems at any time. But in fact, the real diligence and responsibility is to do all that can be thought of, and the recommendation agencies are still unable to do so. " Beijing area small and medium-sized securities investment bank personnel said.

Financing "sharp weapon" ab side

The regulatory authorities have spared no effort to promote the high-quality development of listed companies, among which optimizing the refinancing system of listed companies is an important policy trend.

Convertible bond, as a kind of hybrid securities with both "equity" and "debt", provides diversified choices for enterprises to raise funds, and plays an active role in increasing the proportion of direct financing, optimizing the financing structure, and enhancing the ability of financial services to the real economy.

This also means that the development of the convertible bond market will still be the focus promoted by the regulatory authorities in the future.

Yang VIP, deputy general manager of Dongfang fund and director of fixed income investment, said that convertible bond is a mixed financing method for listed companies. Nominally, it is a kind of debt financing, which is regarded as equity financing mode by actual operation supervision and investors“ The financing cost of convertible bonds is lower than that of equity financing methods such as allotment and issuance. Before the conversion, it is equivalent to a low interest bond, but it does not need to convert shares quickly to dilute earnings per share

Since the beginning of 2020, 223 listed companies have issued convertible bonds, with a total issuance scale of 296.6 billion yuan. In the same period, 130 convertible bonds have announced their issuance plans, with a total of more than 250 billion yuan to be raised. Enterprises have a strong desire to finance through convertible bonds.

"When an enterprise issues convertible bonds, the requirements for financial indicators are significantly higher than those for issuing additional shares. Compared with issuing credit bonds with the same term, the requirements for financial status are also higher. Generally, the approval of issuing credit bonds is very easy for listed companies with rating of AA or below, but it is not easy to issue credit bonds in practice, because bond investors have higher requirements for the qualification of issuing subjects of credit bonds, especially in recent years when there are more credit defaults. " Yang said that the advantages of convertible bond financing lie in the ability to finance with low interest rate, the difficulty of examination and approval is lower than the issue of additional shares, and the market is easy to accept, which does not mean that the enterprise's capital chain is tight.

However, the convertible bond market has been experiencing frequent problems recently. Firstly, in the second half of 2020, some convertible bonds have been over hyped, rising and falling sharply; Recently, the issue of convertible bonds has been stranded due to the deduction of non net profit loss.

These problems need to be paid enough attention by various market entities.

In view of the chaos in the convertible bond market, China Securities Regulatory Commission (CSRC) has issued the "management measures for convertible corporate bonds" at the end of 2020.

In order to solve the problem that the system rules and the attributes of convertible bonds are not completely matched in the market, the system regulation is carried out. However, in the process of issuing convertible bonds, the Information Disclosure Responsibilities of all parties still need to be further refined and implemented. Therefore, it is necessary for the regulatory authorities to conduct on-site inspection on some listed companies whose performance has dropped sharply after the issuance of convertible bonds.

Wu zetao believes that, unlike lawyers, accountants and rating agencies, securities companies need to be responsible for the overall situation of issuers, that is, in addition to relying on the conclusions of professional institutions, securities companies should also conduct independent verification.

        According to its logic, the core issue of the sponsor's responsibility is whether it has fulfilled the obligation of diligence and due diligence in the process of recommendation when the issuer has false statements. In the process of verification, securities companies should be diligent and responsible, and fully prompt risks in the application documents, so as to deal with the liability risks of intermediary institutions caused by false statements of issuers.

 

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