Former title: Ruixing’s capital foreplay of admitting financial fraud: Li Hui’s reduction of holding capital and Liu Erhai’s shares not sold
Surging journalists, thank God
On the evening of April 2, Beijing time, Ruixing coffee submitted a notice to the securities and Exchange Commission (SEC) to publicly admit financial fraud, involving about 2.2 billion yuan of trading volume.
Affected by this, US stocks fell more than 80% before opening, and trading was suspended six times. By the end of the day, Ruixing coffee was at $6.4 per share, down 75.57% from the previous trading day.
So far, under the name of the fastest IPO of zhonggai stock, Ruixing coffee capital, which successfully listed on NASDAQ in only 18 months, has been disillusioned. The capital behind Ruixing coffee, Shenzhou department and Lu Zhengyao, as well as the associated investors, such as Dazheng capital and joyful capital, has also entered the public vision.
The members of the audit committee just changed their blood before disclosing the financial fraud
In a statement to the SEC on April 2, Ruixing coffee said that the board of directors of the company had set up a special committee to supervise an internal investigation of the company, focusing on certain issues in the audit of the consolidated financial statements that attracted the attention of the board of directors in fy19f. It also announced that the company’s self inspection found that the company’s COO (chief operating officer) financial fraud, involving about 2.2 billion yuan of transaction value.
On March 27 a week ago, Liu Erhai, founder and executive partner of pleasant capital, just stepped down as a member of the audit committee of Ruixing coffee.
Pleasure capital is the leading investor in the round a and round B financing of Ruixing coffee, with a total investment amount of 120 million US dollars. After Ruixing went public, Liu Erhai held 5.69% of the shares and was a director of Ruixing coffee.
In response to the speculation about the resignation time, joyful capital responded to the surging news (www.thepaper. CN) that Liu Erhai resigned as a member of the audit committee because the US Securities Law stipulated that the audit committee can only be composed of independent directors.
The surging news reporter inquired about the report submitted by Ruixing coffee to the SEC and found that a report on March 27 introduced the change of board members of Ruixing coffee, which took effect on that day. According to the report, the board of directors welcomes Park tianruo and Wei Yuanzong as independent directors of the audit committee of the board of directors, which will take effect on March 27, 2020. According to the securities and exchange law of the United States of America (1934), the members of the audit committee must be composed of independent directors only one year after the IPO of the company. Liu Erhai resigned as a member of the audit committee. The current members of the audit committee are Shao Xiaoheng, Thomas P. Meier, park tianruo and Wei Yuanzong, and Shao Xiaoheng is the chairman of the Committee.
At present, the members of Ruixing audit committee and the latest independent committee composed of the company’s self-examination of internal financial issues are highly overlapped.
According to the announcement of Ruixing coffee on April 2, the three independent directors of the special committee are Shao Xiaoheng, park tianruo and Wei Yuanzong, and Shao Xiaoheng is the chairman of the Committee. The Commission has retained independent counsel for internal investigations, including independent legal counsel and legal accountants. The special committee appointed Kirkland & Ellis as an independent external consultant and Kirkland & Ellis as an independent legal accounting expert with the assistance of FTI consulting.
“At present, the internal investigation is in the preliminary stage,” the announcement said
According to the preliminary results of the survey, from the second quarter of 2019, the company’s chief operating officer (COO) and director Liu Jian, as well as several employees who reported to him, engaged in misconduct, including fabricating certain transactions. The special committee recommends a number of temporary remedies, including the suspension of Liu Jian and other relevant staff, as well as the suspension of contracts and transactions with parties involved in identified fraudulent transactions.
At present, the board of directors of Ruixing company has accepted the recommendation of the special committee. The company will take all appropriate measures, including legal proceedings against individuals for misconduct.
Joy capital “has not sold a share of Ruixing stock”, and Dazheng capital has cashed out 230 million yuan
Since January 31, muddy waters research, a well-known short seller, released an 89 page report on the sale of Ruixing coffee, there have been constant market rumors about Ruixing. This time, Ruixing revealed that the financial fraud had detonated a bomb for the market.
As for the rumor of selling the shares of Ruixing coffee, joyful capital once again said to the surging journalists: “joyful capital has not sold a share of Ruixing stock.”
On February 13, joyful capital officially issued a statement saying, “since the investment in Ruixing coffee in 2018, joyful capital and its related parties have never sold any shares of Ruixing coffee.”
“Recently, Beijing joy Capital Investment Management Co., Ltd. noticed an article saying that” joy capital sold 2 / 3 of its shares in Ruixing “. Pleasant capital now solemnly states that since it invested in Ruixing coffee in 2018, pleasant capital and its related parties have never sold any shares of Ruixing coffee. In response to the above-mentioned rumor that does not conform to the facts, joyful capital reserves all the right to appeal to the law. ”
However, it is worth noting that together with joy capital, it participated in the financing of round a and round B of Ruixing coffee, and just two months ago, it reduced its holding of Ruixing shares and successfully cashed out.
On January 8, 2020, Dazhen capital reduced 38.4 million shares of Ruixing, with the shareholding ratio reduced from 14.06% to 12.15%, and cashed out $230 million. Dazheng capital told the media at that time that after the reduction, it had recovered its original investment in Ruixing capital. At the same time, it also said that Dazheng capital is still the largest institutional shareholder of Ruixing coffee, and continues to be optimistic about the long-term development prospects of Ruixing.
Dazheng capital was officially established in February 2017, and its total assets under management in 2019 have exceeded US $3 billion. Ruixing coffee is the first investment project of Dazheng capital US dollar phase I fund. When Ruixing went public, Dazheng capital invested nearly US $180 million in total.
According to foreign media, a number of US law firms have filed a class action against Ruixing coffee, accusing Ruixing of making false and misleading statements in violation of US Securities Law. At present, the class action has been filed in the Southern District Court of New York on February 13.
Several firms, including Schall, Rosen and Pomerantz, have issued public statements reminding investors that the class action on lucky coffee is about to reach the deadline for filing. According to its statement, investors who bought shares of Ruixing coffee between November 13, 2019 and January 31, 2020 can contact the law firm if they try to recover their losses, and April 13, 2020 is the deadline.
Shenzhou department and related investors behind Ruixing
Ruixing coffee is one of the companies in Shenzhou department. The largest shareholders of Shenzhou car rental and Ruixing coffee are Lu Zhengyao.
Affected by the collapse of Ruixing coffee, the company of Shenzhou Department suffered a series of heavy losses.
On April 3, Shenzhou car rental (0699. HK), listed in Hong Kong stock market, started to dive, and its share price fell 70% at one time. By the end of trading suspension, the price of car rental in Shenzhou fell 54.42% on the same day; the price of car rental in Shenzhou Youche (838006) also suffered heavy losses, and the share price fell 21.75% as of the closing on April 3.
According to the 2019 annual report of car rental in Shenzhou, Lu Zhengyao and his wife Guo Lichun are the largest shareholders of car rental in Shenzhou, with a shareholding ratio of 29.77%. According to wind data, as of January 21, Lu Zhengyao was also the largest shareholder of Ruixing coffee, holding 23.94%.
In November 2017, Qian Zhiya resigned as the director and COO of China Youche and established Ruixing coffee. Liu Jian, chief operating officer (COO) and director of Ruixing coffee’s “self explosion” incident, was also a car rental veteran in Shenzhou from 2008 to 2015, successively served as the deputy director and revenue management director of Shenzhou car rental management center; from 2015 to 2018, served as the revenue management director of Shenzhou excellent car; from May 2018, served as the COO of Ruixing coffee, and from February 2019, served as the director.
Liu Erhai, founding partner and executive partner of joy capital, Li Hui, founding partner of Dazheng capital and former president of Huaping investment group in Asia Pacific region, all have deep ties with Lu Zhengyao. They are also known as “Shenzhou iron triangle”.
According to Wande data, among the major shareholders of Ruixing coffee, Li Hui holds 9.33% of the shares, and Liu Erhai holds 5.3% of the shares, all of which are more than 5%. Both are members of the board of directors of Ruixing coffee.
Lu Zhengyao and Liu Erhai have known each other for a long time. Since knowing the chairman of Ruixing coffee Lu Zhengyao in 2006, Liu Erhai has invested in three companies founded by Lu Zhengyao, including Shenzhou car rental in 2006, Shenzhou excellent car in 2015 and Ruixing coffee in 2016.
However, another company of Shenzhou department, baowo automobile pleasure capital, did not invest. There are market rumors that Shenzhou department is inclining resources to baowo, and baowo automobile is the protagonist of Lu Zhengyao’s next capital story.
Pleasant capital told the surging journalists that pleasant had not invested in baowo or participated in the excellent car industry fund created by Lu Zhengyao.
Li Hui is the chairman and managing partner of Youche Industrial Fund. According to tianyancha information, Youche industrial fund was initiated and established by Youche in Shenzhou, with a total scale of 10 billion yuan. The RMB Private Equity Fund, which focuses on the investment in the automobile industry chain, will work in coordination with the platform advantages of Shenzhou Youche in the travel and automobile industry chain, focus on the vertical integration and consumption mode innovation of the whole automobile industry chain, and focus on the investment in new energy vehicles, upstream and downstream supporting industries, intelligent driving and innovation projects in the field of vehicle networking technology.