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Justice may be late, but it is never absent.
According to ** report, the once sensational Zhangzidao "scallop runaway" case has been concluded. The disclosure of some of these details is staggering. The initiator of the incident, Wu Hougang, the former chairman of Zhangzidao, was sentenced to 15 years in prison and fined 920,000 yuan. 15 years, no problems at all!The Zhangzidao investors who had been pitted for many years were finally able to release the evil anger that had been held back for many years!
Speaking of the "scallop runaway" case in Zhangzidao, it is still surprising in retrospect, and it can be called a magical realist work in the world of listed company fraud. Zhangzi Island is located in the southernmost part of the Changshan Islands in Dalian, Liaoning Province, and is rich in aquatic resources, especially Ezo scallops and sea cucumbers, which are well-known throughout the country. With its seafood business, Zhangzidao once became a well-known and wealthy town in Dalian, with a per capita income of more than 10,000 yuan in 2000. In 2006, Zhangzidao Group was listed on the Shenzhen Stock Exchange and created a record of the first 100-yuan stock of a Chinese agricultural company. The real show started in 2014. In October of that year, Zhangzidao suddenly made an announcement, saying that due to the influence of the cold current, its own scallops had collectively run away and their whereabouts were unknown, resulting in the company's more than 1 million mu of scallops underharvesting, resulting in a loss of nearly 1.2 billion yuan. Although scallop running away may sound magical, people are mariculture after all, and it is not as controllable as in a pond. So investors didn't dig too deep into it at the beginning, just regarded it as a natural and man-made disaster, and the matter just passed. But if you don't want people to know, you can't do it unless you do. Soon Zhangzidao was exposed. Half a year later, in June 2015, an ordinary announcement from Zhangzidao attracted the attention of investors. The announcement said that the company launched a scallop spot check activity in May 2015, sampling more than 160 acres of sea area that was not harvested after sowing seedlings in previous years, and the results of the sampling survey showed that the company's scallops did not have the risk of impairment. The so-called "unharvested sea area after sowing seedlings in previous years" includes scallops that ran away due to the "cold water mass" in 2014. But in less than 1 year, Zhangzidao changed his mind and said that there is no risk of impairment of scallopsAlthough there are already doubts in the market, Zhangzidao is not panicking at all. Later, in January 2018, it was announced again that its scallops had been "starved to death". This time it's not because the water is too cold, it's because the water is too hot. The abnormal sea temperature caused the scallops after the high temperature period to become thinner and thinner, and the quality became worse and worse, and the scallops that had been starved for a long time did not recover, and finally induced death. 
This time, the scallops "starved to death", and the supervision couldn't stand it, so an investigation team of more than 20 people was sent to Zhangzidao Town to conduct on-the-spot investigations. It stands to reason that the supervision has been shot, and it is time for Zhangzidao to converge and converge. But Wu Hougang is biased, and chooses to be "tough" to the end. In order to "prove his innocence", Wu Hougang said to ** many times, saying that "not only the scallops of Zhangzidao are dead, but also the scallops of Japan are dead", "Zhangzidao's performance has changed its face, making itself more and more in awe of nature", "The complexity of the natural world has no regular changes." ”By this time, Wu Hougang still insisted that the loss of scallops was caused by force majeure in nature. Then, in January 2019, Zhangzidao announced again, saying that his scallops had left again. Later, after a 17-month investigation by the Securities Regulatory Commission, the truth of the "scallop runaway" incident in Zhangzidao was finally revealed. It's all for the sake of profit!In 2014 and 2015, Zhangzidao has lost money for two consecutive years, and if it continues to lose money in 2016, Zhangzidao will face delisting. In order to maintain the status of a listed company, headed by Chairman Wu Hougang, Zhangzidao directed a farce of scallops running away. Taking advantage of the fact that the cost of bottom-seeded aquaculture products is directly linked to the fishing area, Zhangzidao deliberately underreported the harvested area in the fishing records, and inflated the profit in 2016 by inflating the cost. In the second year, the sea area that has been harvested in the previous year will be included in the sea area for write-off, and the operating cost will be inflated, and the loss will be exaggerated by inflating the non-operating expenses and the impairment loss of assets. Through this kind of cost shifting, although Zhangzidao's profits are like a roller coaster of profits and losses a year, it cleverly avoids the punishment of delisting due to continuous losses. The so-called "scallop run away and die" is intended to cover this cost shift. 
Zhangzidao's net profit over the yearsAfter the Zhangzidao financial fraud case, Chairman Wu Hougang was banned from the market for life by the China Securities Regulatory Commission and fined. Now he has been sentenced to another 15 years. There are also corresponding penalties for other relevant personnel. At this point, it should be the end of the matter. But many of the deeper questions remain puzzling. First of all, is Zhangzidao's concoction of the negative news of "scallops running away" just to facilitate the manipulation of financial statements?According to smart investors, the company's stock price fluctuated sharply before and after Zhangzidao first announced the "scallop flight" in 2014. According to official media reports, Zhangzidao's management and private equity funds took the opportunity to buy the ** thrown away by shareholders. For example, Xu Xiang, a bigwig of tour capital, took the opportunity to make a profit of 400 million yuan** and made a profit of more than 40 million yuan in 2 days. 
Zhangzidao has used "scallop escape" three times in the past 6 years to release bad news. Is there a secret pass with private equity in the middle, speculating on the stock price to make a profit?Have the profiteers who participated in the speculation been penalized?It stands to reason that after the destruction of Zhangzidao, these details should be clarified, the illegal gains of the relevant funds should be confiscated, and the investors who were deceived by the company should be compensated. Second, if all the "bad guys" are arrested, will the problem of Zhangzidao be solved?The reason why former chairman Wu Hougang took the risk to falsify was ostensibly to beautify the financial report and avoid the company's delisting. In the final analysis, it is because Zhangzidao's own performance is deteriorating, and it has reached the verge of delisting. Wu Hougang was arrested, but Zhangzidao's own problems have not been solved. From 2020 to the first three quarters of 2023, Zhangzidao's revenue was 192.7 billion yuan, 208.3 billion yuan, 202.1 billion yuan, 128.1 billion yuan, the overall downward trend. In terms of net profit, the first three quarters from 2020 to 2023 will be 03.6 billion yuan, 02.4 billion yuan, 02.8 billion yuan, 03.4 billion yuan. 
Zhangzidao seems to be profitable every year and has gotten rid of the loss quagmire of Wu Hougang's era, but in fact it is the result of constantly "continuing its life". Since the beginning of 2020, Zhangzidao has continued to sell assets to return blood in order to maintain the "illusion" of its own profits. For example, in January 2020, Zhangzidao transferred the lease rights and seabed inventory of 4 sea areas located in Guanglu Island, Changhai County, respectively0.1 billion yuan. In April 2020, Zhangzidao transferred 75% of the equity of its holding subsidiary** Refrigeration and cashed out 13.7 billion yuan. In December 2021, Zhangzidao transferred the relevant assets of Zhangzidao Zhuanghe Branch**, with a working capital of 95 million yuan. In July 2022, Zhangzidao transferred the relevant assets of its subordinate Wubangdao Branch by way of public listing, including housing (structure), inventory, equipment and sea area use rights located in Wubangdao Village, Xiaochangshan Island Town, Changhai County, with a working capital of 8272140,000 yuan. In December 2023, Zhangzidao will transfer the assets of the company's abalone factory, the assets of the original nursery plant No. 3 and the right to use part of the sea area, etc., and the public listing and transfer ** shall not be less than 10.2 billion yuan. It is not difficult to find that Zhangzidao basically sells assets once a year, cashing out about 100 million yuan each time, which just makes the net profit positive. In fact, if you only look at the non-net profit, Zhangzidao has been losing money for three consecutive years. 
Zhangzidao's profit from 2020 to 2022Does a company like Zhangzidao that "survives" by selling assets still have investment value?Is it still necessary to continue to go public?Ironically, in 2023, when the overall situation is not good, there is not a lot of money to hype Zhangzidao. As of the last trading day of the year, Zhangzidao closed at 449 yuan, with a rolling P/E ratio of 122 times, and an increase of 24 for the whole year of 202372%, far outperforming**. Finally, it is also one of the most interesting points for smart investors. Why does Zhangzidao lie one after another and seem so fearless?Even after being placed on file for investigation, he still insisted on lyingIn the case of "scallop runaway", there is a detail. It took 17 months for the supervision to expose the lies of Zhangzidao, and at the last moment, the Beidou navigation system was used to locate the real navigation trajectory of the Zhangzidao fishing ship to expose Zhangzidao's deception. 
This detail illustrates a problem - the inventory of Zhangzidao cannot be counted by ordinary people. All the products are under the sea, and even the most dedicated accountant cannot put on a diving suit and run to the bottom of the sea to count shells. Even if you count, you can't count them. Auditors go to take inventory, at most, they conduct sampling tests at several breeding sites, and there are many ways to hide from the world. 
Therefore, the characteristics of scallops that are not easy to inventory have become a "protective umbrella" for Zhangzidao to counterfeit without fear. In the agriculture, forestry, animal husbandry and fishery sector, many planting and breeding companies are usually difficult to carry out industrialized production and management due to the limitation of "special inventory", and the capital turnover rate is low, and it is generally difficult for enterprises to become bigger. However, it is precisely because of the small size of the enterprise that it gives room for speculation. In addition, it is difficult to take inventory of "special inventory", and the cost of "Zhangzidao-style counterfeiting" is much lower than that of other companies.