Recently, the parent company of the well-known children's clothing brand ABC Kids, the start-up stock known as the "first share of children's clothing", hereinafter referred to as "ST Start"), was fined for a financial fraud scandal. ST Start (603557.)SH) announced that the company and the relevant responsible persons received the administrative penalty decision issued by the China Securities Regulatory Commission and the warning letter issued by the Zhejiang Supervision Bureau. The cause is falsification of financial reports, major omissions, information disclosure violations and regulations, etcST start-up and related responsible persons were fined 57 million yuan, and many people were banned from the market for 5 years and 10 years. Is this fine affordable for ST start-ups, which are riddled with debt and declining revenues?Will it be reflected in the latest earnings report?On December 18, ST responded to reportersThe fine has no impact on the latest earnings reportThe Company received prior notice in the second quarter and has included the penalty in its second quarter financial report. At present, the fine has not been paid, and the company may apply for an extension or installment payment. The warning letter showsThere were two violations of laws and regulations at the beginning of ST. The first is that there are false records and major omissions in the company's regular reports, which mainly involve fictitious increases in operating income, operating costs and total profits by means of fictitious procurement and sales business. After investigation, from 2018 to 2020, ST started to increase the total operating income by 36.2 billion yuan, operating costs 23.2 billion yuan, total profit 1300 million yuan. The reporter noted that ST started to be listed on the Shanghai Stock Exchange in August 2017. This also means that less than a year after being listed, ST started financial fraud.
The issue of "material omission" in the warning letter is related to the failure to disclose the shares held by the actual controller. In December 2016, Zhang Limin, then chairman of ST Start-up and the original actual controller, and Liang Jijin and other four people respectively signed the "Equity Holding Agreement", stipulating that they would hold the shares of the four companies on their behalf and not handle the transfer of ownership for the time being. During the period of nominee shareholding, the company did not disclose the nominee shareholding behavior in the 2018 and 2019 annual reports. Another violation of laws and regulations at the beginning of ST is that the company's public offering documents contain material falsehoods. In March 2020, ST Start-up disclosed its 2018 and 2019 semi-annual financial statements in the Prospectus for Public Offering of Convertible Corporate Bonds. Due to the fact that ST started to inflate its operating income, costs and profits in 2018 and the first half of 2019 through fictitious business methods, the relevant content of "financial and accounting information" in the prospectus was materially false. It is understood that in January 2022, the China Securities Regulatory Commission has filed a case on this matter;In May 2023, ST received the "Prior Notice of Administrative Penalty and Market Prohibition" issued by the China Securities Regulatory Commission;Until the beginning of December, the China Securities Regulatory Commission issued the "Administrative Penalty Decision". The CSRC believes that Zhang Limin, then chairman of ST Start-up, Zhou Jianyong, then director and general manager, Chen Zhangwang, then chief financial officer, and Wu Jianjun, then secretary of the board of directors, should bear the main responsibility for the above-mentioned violations of laws and regulations. In this regard, ST Qiqi has put forward 5 defense opinions, but none of them have been adopted. In the end, ST started and the aforementioned four people were fined 57 million yuan by the CSRC and ordered to make corrections;The four executives at the time were fined a total of 20 million yuan, and three of them were banned from entering the market for 5 years and 10 years. ST Startup responded to the matter in the announcement: "The company sincerely apologizes to the majority of investors for the impact of the above matters. Investors can rely on the company's active cooperation to protect the legitimate rights and interests of investors. The company will correct the error as soon as possible and actively rectify it. According to the data, ST started mainly to design, research and development, production and sales of children's shoes, children's clothing and children's clothing accessories, etc., and has children's shoes and clothing "ABC Kids", fashion sports life brand "EXR" and other brands. In the past three years, ST has continued to lose money. According to the third quarter report of 2023, the company's total revenue in the first three quarters was 23.1 billion yuan, a year-on-year decrease of 3608%；Net loss of 28.2 billion yuan, a year-on-year decrease of 6496%。Not only that, but ST shares are also riddled with debt. As of November 20, 2023, the principal of the company's overdue borrowings was subtotaled 2700 million yuan, and the interest on overdue loans alone is 1926390,000 yuan. The total overdue principal and interest is 28.9 billion yuan, accounting for 4136%, which does not include liquidated damages and penalty interest incurred due to overdue. Southern ***nddaily), n** report
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