Although LETV has been delisted, its impact on the capital market is still fermenting.
On January 17, Shanxi Securities Co.Ltd(002500) issued an announcement. On January 13, Zhongde securities, the holding subsidiary of the company, received a civil complaint served by the Beijing Financial court. The cause of action was a dispute over the liability for Securities Misrepresentation.
According to the announcement, 2000 plaintiffs such as Shanghai Junying asset management partnership (limited partnership) filed a civil lawsuit against LETV and other 21 defendants to the Beijing Financial court, requiring LETV to compensate for the investment loss of 4.571 billion yuan caused by its misrepresentation, and requiring the other 20 defendants to bear joint and several liability, including three securities companies. Sino German securities is one of the 21 defendants and is required to bear joint and several liability.
LETV was identified as “five crimes” and the fixed increase in 2016 constituted a fraudulent issuance
On April 2, 2021, the CSRC issued the decision on administrative punishment ([2021] No. 16), which determined that LETV had violations of laws and regulations, and imposed administrative punishment on LETV, Jia Yueting and other 14 natural persons. Among them, LETV was fined 241 million yuan and Jia Yueting was fined 241 million yuan.
Previously, on July 21, 2020, LETV had terminated its listing, and the closing price on the last trading day was fixed at RMB 0.18 per share. According to the listing rules, LETV cannot be re listed due to fraud and delisting.
There are five main violations of LETV finally identified by the CSRC:
First, LETV made financial fraud from 2007 to 2016, and there were false records in the documents related to its application for initial public offering and listing (hereinafter referred to as IPO) and its annual reports from 2010 to 2016; Second, LETV failed to disclose related party transactions as required; Third, LETV did not disclose the provision of guarantees for LETV holdings and other companies; Fourth, LETV did not truthfully disclose that Jia Moufang and Jia Yueting fulfilled their loan commitments to listed companies; Fifth, LETV’s non-public offering of shares in 2016 constituted a fraudulent offering.
The reason why Sino German securities became the 21 defendants in LETV’s case this time is related to LETV’s non-public offering in 2016.
According to relevant data, LETV raised a total of 4.8 billion yuan in fixed growth in 2016, which was issued to CAITONG fund, “niusan” Zhang Jianping, Harvest Fund and China Post venture fund. Sino German securities acted as the sponsor and lead underwriter, and pulled Zhongtai Securities Co.Ltd(600918) as the joint lead underwriter.
Earlier, LETV’s IPO sponsor was Ping An Securities.
As can be seen from today’s announcement, the liability of intermediaries including Sino German securities has also been officially recognized: three securities companies such as Sino German securities and three accounting firms bear joint and several liability for failure to exercise due diligence and fail to find LETV’s financial fraud. Therefore, Sino German securities is prominently listed among the 21 defendants of LETV.
In 2016, Sino German securities was fined 6 million yuan
It is worth mentioning that it is not the first time that Sino German securities has been exposed that it has failed to perform its duties diligently in the project.
In September 2016, Li Qingzhong and Wang Xin, sponsors of Sino German securities and financial advisers, received the decision on administrative punishment from the CSRC because “as the financial adviser of Tibet Ziguang Zhuoyuan Equity Investment Co., Ltd., they were not diligent and responsible” in the equity transfer of * ST Kunji. According to the provisions of the securities law at that time, the CSRC decided to order Sino German securities to make corrections, confiscate its business income of 3 million yuan and impose a fine of 3 million yuan; Li Qingzhong and Wang Xin were warned and fined 50000 yuan respectively.
Judging from the huge amount involved in LETV, if Sino German securities is sentenced to joint and several liability this time, it may have a great drag on the performance of Shanxi Securities Co.Ltd(002500) investment banks.
According to the data of China stock market news choice financial terminal, Sino German securities achieved a master underwriting revenue of 103 million yuan in 2021, with a market share of 0.29%, ranking 47th (according to the statistics of the issuer’s statements). While Shanxi Securities Co.Ltd(002500) in the first three quarters of 2021, the net income from investment bank fees was 313 million yuan. If LETV’s 21 defendants bear the responsibility on average, Shanxi Securities Co.Ltd(002500) may incur non recurring losses of up to 200 million yuan. However, how much responsibility Shanxi Securities Co.Ltd(002500) will ultimately bear needs to be determined by the court. The company also pointed out in the announcement: “in view of the fact that the case has not yet been heard, it is impossible to judge the impact on the company’s profits in the current period or after the period”.
