After more than a year, the shareholder dispute between Guorong ** may be finalized.
Wall Street News Trade Winds (ID: tradewind01) exclusively learned from a number of people close to Guorong ** that the civil arbitration filed by Hangzhou Purun Xingrong Equity Investment Partnership (Limited Partnership) (hereinafter referred to as "Hangzhou Purun") against Beijing Chang'an Investment Group***, the controlling shareholder of Guorong**, in the second half of 2022 has recently been won.
This is obviously worse for Chang'an Investment, which has a tight capital chain.
Since the second half of last year, Chang'an Investment has encountered a number of lawsuits or arbitrations, and its shares in financial licenses such as Guorong**, Guorong**, and Capital ** have also been frozen.
The result of this ruling means that if Chang'an Investment is unable to fulfill the corresponding payment obligations, its shares in Guorong ** may be auctioned and eventually completely eliminated from the existing controlling shareholder's seat.
This arbitration dispute originated from the old pre-IPO financing VAM case of Guorong ** 7 years ago.
When Guorong ** increased its capital and shares in 2016, Hangzhou Purun, as the second largest shareholder of the new company, led Tianjin Jirui Enterprise Management Consulting Partnership (hereinafter referred to as "Tianjin Jirui"), Hengqin Xinhe Taidao Investment Management Center, Beijing UFIDA Technology and Ningxia Yuangao Industrial Group, including 5 institutions to invest a total of 162.3 billion yuan, with 498 yuan shares**subscribe to Guorong** additional issuance of 32.6 billion shares, and in exchange, Chang'an Investment must ensure that Guorong** completes its listing in the next five years.
Due to various factors such as performance and market, Guorong not only failed to IPO as scheduled, but also the valuation of the industry fell all the way.
As of the end of 2015, the net assets per share of Guorong** were only 1$43, which means that the price-to-book ratio PB valuation of the capital increase priced 7 years ago is as high as 348 times, but as of December 8, 2023, the CSI** Company Index PB is only 131 times.
In fact, the excessive price of the capital increase seven years ago was also related to the above-mentioned VAM arrangement.
The capital increase in 2016 was led by (Hangzhou) Purun, and several other companies participated, but the shareholding at that time was indeed relatively high, because it contained a VAM clause, and if it did not contain a VAM condition, it would definitely not be this **. A person close to the above-mentioned capital increase deal said.
As a result, Guorong was unable to IPO for a long time, and finally triggered the repurchase obligation of Chang'an Investment of more than 2 billion yuan.
However, due to the tight capital chain of Chang'an Investment's own capital chain, coupled with the aborted plan to control Qingdao state-owned assets **Guorong**, it was finally filed for arbitration by Hangzhou Purun last year.
Under the arbitration rights protection, Chang'an Investment's entire shareholding in Guorong ** (recorded as 125.9 billion yuan) was frozen by the judiciary more than a year ago.
The above-mentioned person close to Guorong ** pointed out that the victory of Hangzhou Purun's arbitration means that Chang'an Investment must fulfill the previously agreed VAM failure repurchase obligation on time, and this 7-year IPO VAM will also usher in an end.
Today's Chang'an Investment may not be able to come up with enough cash to fulfill the contract.
As of the end of 2022, the total current assets of Chang'an Investment's parent company were only 54.6 billion yuan, while the monetary fund is only 2.04 million yuan, and it has been considering its assets since last year in order to get more liquidity.
For example, as early as 2021, Chang'an Investment tried to transfer the control of Guorong ** to Qingdao State-owned Assets to obtain more cash, but the acquisition was ultimately aborted because it was not approved.
At the beginning of this year, Chang'an Investment reached a transaction intention with a small and medium-sized brokerage firm in East ChinaAbout 700 million yuan ** transferred the control of its public offering institution Guorong**, but later the matter was closed due to multiple reasons.
On the one hand, the financial license has been unable to change hands for a long time, and on the other hand, more litigation disputes are also coming.
Also in the second half of 2022, Tianjin Jirui also put Chang'an Investment in the dock due to the old IPO VAM case 7 years ago, and under this lawsuit, Chang'an Investment's Capital ** and Shanghai Guruo Investment Center (Limited Partnership), which is the shareholding carrier of Guorong**, were also frozen.
At the same time, the sequelae left by the failure of Chang'an Investment's "selling" Guorong ** to Qingdao state-owned assets also began to attack.
On September 4 this year, Qingdao Guoxin Development (Group) Co., Ltd., a platform company under Qingdao state-owned assets, also pushed Chang'an Investment into the dock, trying to get back the deposit paid when it wanted to acquire Guorong.
Also at the end of last year, all the shares of Shanghai Guruo Investment Center (Limited Partnership) (hereinafter referred to as Shanghai Guruo), which is the shareholding carrier of Guorong **, held by Chang'an Investment, were recently frozen by the Beijing Second Intermediate People's Court.
Under the embattled nature of litigation and tight funds, the defeat of this arbitration is tantamount to a "blow to the heart" for Chang'an Investment.
Compared with the second-instance final adjudication system of traditional litigation, arbitration tends to be "substance over form" and has higher efficiency, and this method can often determine the winner through "one arbitration".
According to sources close to Chang'an Investment, Chang'an Investment is still considering "applying for revocation of the award" to deal with this outcome.
The company may also consider applying for dismissal. The person noted.
However, a person close to Hangzhou Purun pointed out that due to the clear contractual requirements of the case, the possibility of the arbitration result being revoked is not high.
Because this matter has been contractually agreed, Chang'an Investment has had similar lawsuits before, but the main reason for the failure to implement it is that Guorong ** belongs to the brokerage license, and the procedures for share change are more complicated. The above-mentioned person close to Hangzhou Purun pointed out, "But this time it triggered the repurchase obligation, and the shares of Guorong ** were frozen as preservation assets." ”
At present, it is also becoming more difficult for Chang'an Investment to obtain cash through its license.
On the one hand, the current regulation of financial licenses is becoming stricter, and the number of potential counterparties in the market is limitedOn the other hand, due to the previous overpricing of pre-IPO financing, Changan Investment needs to sell its license to a sufficient price to obtain the required amount for the repurchase, but this is also difficult due to the current low market valuation.
In the early years, when these shareholders of Purun came in, they were integrated according to a relatively high valuation, which also tacitly acknowledged that the repurchase of Chang'an Investment would be relatively high compared to the current one. The above-mentioned person close to Guorong said, "The key is that not only the value of Guorong has not been significantly improved in recent years, but the overall valuation of the industry has fallen, even if it is the control of the license, it is difficult to sell a very high **."
In the eyes of industry insiders, if Chang'an Investment is unable to raise funds to fulfill its payment obligations, its holdings of Guorong**, Guorong**, Capital ** and other financial license shares may go to auction or even change hands.
Chang'an Investment has not sold its licenses several times before, and this time under the pressure of debt litigation, it may be forced to enter the judicial auction procedure, which may lead to the eventual loss of these financial licenses by Chang'an Investment. The above-mentioned person close to Guorong ** said. (Xi student Yaru Jiao also contributed to this article).
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