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Introduction: The double increase in revenue and profit has naturally laid a solid foundation for Tongling Technology to enter the A-share market for the second time, but it also brings uncertainty about how long Tongling Technology's high profit growth in 2023 can last. In addition, in the past few years, Tongling Technology's repeated violations of information disclosure and other issues have raised questions about the effectiveness of the company's internal control, which will also add some concerns to its listing on the Beijing Stock Exchange this time.

This article was exclusively published by Koukou Finance (ID: koukouipo)

Author: He Zhuowei@Beijing

Editor: Zhai Rui@Beijing

Another "difficult" listed company that encountered difficulties in the A-share Shanghai and Shenzhen IPO review is about to sound the charge to the Beijing Stock Exchange for a new round of capital offensive.

According to Kekou Finance, after more than two years of listing guidance, Shanghai Tongling Automotive Technology Co., Ltd. (hereinafter referred to as "Tongling Technology") has finally submitted a report on the completion of the guidance work to the Shanghai Securities Regulatory Bureau and has officially entered the acceptance stage. If nothing unexpected happens, the acceptance results will be announced in the near future.

If Tongling Technology's listing guidance work can be successfully approved by the regulatory authorities, it will then choose an opportunity to submit a listing application to the Beijing Stock Exchange as soon as possible, thus kicking off a new round of capitalization.

This is the first time that Tongling Technology has restarted its listing plan after its IPO application on the Shenzhen Stock Exchange's Growth Enterprise Market was rejected several years ago at the end of 2017.

"Originally, Tongling Technology had been working towards the goal of an IPO on the ChiNext board. However, due to changes in its own and external regulatory environment, it had to 'accept downgrade' and choose the Beijing Stock Exchange at the last moment before completing its listing guidance." An insider close to Tongling Technology told Kekou Finance.

According to the guidance plan for this round of re-listing submitted by Tongling Technology to the Shanghai Securities Regulatory Bureau at the end of June 2022, it did want to continue to sprint for an IPO on the ChiNext.

On June 12, 2024, Tongling Technology suddenly announced to its shareholders that it intended to change the relevant plans for public issuance of shares and listing, and change the listing destination to the Beijing Stock Exchange, which has a lower listing threshold for companies and is more inclusive.

Just half a month after deciding to list on the Beijing Stock Exchange, Tongling Technology and its guidance agency submitted relevant reports and applications for guidance acceptance to the Shanghai Securities Regulatory Bureau.

"Currently, the final preparatory work for Tongling Technology's application for listing on the Beijing Stock Exchange is being carried out in an intensive and orderly manner. After the acceptance by the Shanghai Securities Regulatory Bureau, it is expected that the listing application will be formally submitted to the Beijing Stock Exchange in the time window around the release of the 2024 interim report." The above-mentioned person familiar with Tongling Technology revealed to Kekou Finance.

Regarding the specific financing plan for Tongling Technology's listing on the Beijing Stock Exchange, the above-mentioned person familiar with the matter told Kekou Finance that it has been basically finalized.

"Compared with the first IPO application on the ChiNext seven years ago, this listing on the Beijing Stock Exchange takes into account factors such as Tongling Technology's own fundamentals, actual capital needs and issuance environment. The overall issuance scale and expected financing amount will be basically the same, but the composition of the fundraising and investment projects is completely different." The above-mentioned person familiar with the matter admitted.

Looking back at its first IPO attempt seven years ago, Tongling Technology may no longer want to talk about this past failure.

As an enterprise mainly engaged in the research and development, production and sales of automotive interior parts and related molds, it could not wait to submit its initial IPO application to the China Securities Regulatory Commission as early as June 2016.

According to its IPO filing documents that year, Tongling Technology had hoped to issue no more than 15.55 million shares through the GEM listing to raise 420 million yuan to invest in two major projects, namely "the new factory building of Shanghai Tongling Auto Parts Co., Ltd." and "the new production base in the United States."

Tongling Technology, which applied for its first GEM IPO, subsequently underwent a year and a half of review, but unfortunately failed to obtain the approval of the IPO review committee members at the 81st IPO Review Meeting of the 17th IPO Review Committee of the China Securities Regulatory Commission held on December 26, 2017, and they cast a veto vote on it. At the IPO review meeting held on the same day, a total of three companies, including Tongling Technology, had their IPO applications reviewed at the meeting, and Tongling Technology became the only company that was not approved that day.

Nearly seven years after its initial failed attempt to go public on the Growth Enterprise Market, Tongling Technology has now temporarily changed its listing route to the Beijing Stock Exchange in order to further ensure the success of its listing. Will this allow it to finally realize its dream of going public?

According to the above-mentioned person familiar with the matter who revealed to Kekou Finance, the listing financing plan that Tongling Technology is about to submit to the Beijing Stock Exchange will still issue no more than 15.6 million new shares, and the scale of fundraising will be approximately 427 million yuan, which will be mainly invested in three major projects including "Wuhan Tongling Ward Automotive Interior Parts Production", "R&D Center Upgrade" and "Shanghai Tongling Intelligent Upgrade". It is worth mentioning that Tongling Technology will also plan to provide the company with up to 120 million yuan to supplement its working capital through this listing on the Beijing Stock Exchange.

"In recent years, Tongling Technology's operating conditions have made great progress compared to those years. Both its revenue scale and net profit have achieved sustained growth in a stable manner. Not only that, Tongling Technology has also carried out rectification and compliance in response to a series of issues raised by regulators after the last IPO was rejected. If it can continue to maintain its current business development momentum and under the premise of further compliance and internal control management, Tongling Technology's journey to list on the Beijing Stock Exchange is still worth looking forward to." The above-mentioned person familiar with the matter believes.

A set of financial data of Tongling Technology in recent years obtained by Koko Finance shows that in the past few years, it has always been aiming for an IPO on the ChiNext, and judging from its revenue scale and profit value, it does have the strength to continue to sprint to the ChiNext.

In the three years from 2021 to 2023, after correcting the accounting errors, Tongling Technology's revenue and profits did show a sustained growth as the above-mentioned insiders said, especially in mid-2023, Tongling Technology's operating income exceeded 1 billion for the first time. On the basis of a year-on-year increase of 10.87%, its non-GAAP net profit increased by 65.36% year-on-year, which also made its non-GAAP net profit exceed 100 million for the first time.

The double increase in revenue and profit naturally laid a solid foundation for Tongling Technology's second attempt to enter the A-share market, but the uncertainty it also brings is how long the high profit growth that Tongling Technology will achieve in 2023 can be sustained.

Not only that, in the past few years, Tongling Technology’s repeated violations of information disclosure have raised questions about the effectiveness of its internal controls, which may also add some concerns to its path to listing on the Beijing Stock Exchange.

Indeed, Tongling Technology has natural advantages in applying for listing on the Beijing Stock Exchange.

As early as November 2015, Tongling Technology took the lead in completing its listing on the New Third Board and became a public company.

After Tongling Technology’s initial IPO was rejected by the China Securities Regulatory Commission at the end of 2017, the company was so disheartened that it even announced plans to terminate its listing on the New Third Board.

But after quickly calming down from its emotions, Tongling Technology halted its plan to terminate trading on the New Third Board, and has retained its status as a public company to this day, and successfully entered the Innovation Layer of the New Third Board in May 2020.

All of this has created the greatest convenience for Tongling Technology's application for listing on the Beijing Stock Exchange.

Logically speaking, with nearly ten years of experience in identity supervision of public companies, Tongling Technology should have a deeper understanding of the relevant regulatory requirements for information disclosure. However, around 2022, its information disclosure violated regulations one after another. On the one hand, it claimed that it would strengthen management, but on the other hand, it repeatedly committed the same mistakes. This may reflect the defects in the control of its internal management system.

1) The mystery of changing the “location” at the last minute before the end of the tutoring

In order to realize its dream of listing on the A-share market, Tongling Technology may have paid more than just the price of time after suffering a heavy blow from IPO more than six years ago.

Back to the end of 2017, at the IPO review meeting held by the China Securities Regulatory Commission to decide the fate of Tongling Technology's IPO, the review committee members raised five major questions about Tongling Technology. Among them, the one that was later considered to affect the final outcome of Tongling Technology's listing was the rationality of the identification of its actual controller and the resulting conflicts of interest such as peer competition.

Public information shows that Tongling Technology recognized its chairman Xiang Chunchao as the company's actual controller that year.

However, Xiang Chunchao was not the largest shareholder of Tongling Technology at that time. He only directly held 13.86% of the shares of Tongling Technology, making him the second largest shareholder of Tongling Technology. The natural person Jiang Desheng held a 27.646% stake in Lingtong Technology, far exceeding Xiang Chunchao. At this time, Jiang Desheng also served as the director and general manager of Lingtong Technology.

Xiang Chunchao controlled nearly 64% of Tongling Technology's equity at that time through a series of agreements on joint actors, but Jiang Desheng did not form a joint actor relationship with Xiang Chunchao.

Under this relatively special equity structure, the regulators doubted whether Tongling Technology’s identification of the actual controller was sufficient, and asked Tongling Technology to explain the reasons and rationality for not identifying Jiang Desheng, Xiang Chunchao and others as persons acting in concert.

Afterwards, the regulators mentioned that as the largest shareholder of Tongling Technology, Jiang Desheng, in addition to Tongling Technology, also controls a number of companies engaged in automotive interior production-related businesses, which may have competition or conflicts of interest with Tongling Technology.

After Tongling Technology's IPO was rejected by the China Securities Regulatory Commission that year, a senior investment banker in the industry analyzed that the reason why Tongling Technology's listing application failed to receive regulatory approval was because it did not identify Jiang Desheng as one of its actual controllers in order to get rid of the recognition that many of his companies were in competition with Tongling Technology. Therefore, the regulator believed that there were major omissions in the information disclosure of Tongling Technology's IPO.

According to the IPO rejection notice issued by the CSRC to Tongling Technology in early 2018, the reason given by the Issuance Examination Committee was that "this application does not comply with the provisions of Article 4 and Article 41 of the "Administrative Measures for the Initial Public Offering and Listing of Stocks" (CSRC Order No. 122)."

Article 4 and Article 41 of the Administrative Measures for the Initial Public Offering and Listing of Stocks respectively state that "the information disclosed by the issuer in accordance with the law must be true, accurate and complete, and must not contain false records, misleading statements or major omissions", and "the standards for the content and format of the prospectus are the minimum requirements for information disclosure. Regardless of whether the standards have clear provisions, all information that has a significant impact on investors' investment decisions should be disclosed."

With this precedent in mind, Tongling Technology, which is planning to go public again this time, naturally must make targeted rectifications to its "special" shareholding structure back then.

So after a series of operations, around 2022, when Tongling Technology finally started its listing guidance work again, Jiang Desheng not only gave up the position of general manager which he had held for many years, but also transferred most of his shares in Tongling Technology through bulk transactions and other means.

Public information shows that Jiang Desheng can be regarded as one of the most important founders of Tongling Technology.

Since Tongling Technology was established in June 2007, Jiang Desheng has served as its general manager until September 2021, when Yu Yonghuai, the current general manager of Tongling Technology, took over.

At the same time as Jiang Desheng stepped down as general manager, he began to transfer a large number of relevant equity of Tongling Technology through block transactions.

However, when Jiang Desheng resigned from Tongling Technology, his son Jiang Jingwei was briefly promoted to deputy general manager of Tongling Technology.

But on the eve of Tongling Technology's launch of listing guidance in 2022, Jiang Desheng's shareholding in Tongling Technology was only 4.14%, less than 5%, falling from the position of the largest shareholder to the seventh place.

During the same period, Jiang Jingwei also resigned from his position as deputy general manager of Tongling Technology.

"The 'farewell' of Jiang's father and son in Tongling Technology also completely resolved the rationality of the identification of the actual controller that caused the IPO controversy that year and the issue of intra-industry competition involved. In addition, in order to further consolidate the compliance in the identification of the actual controller, Tongling Technology decided to add Xiang Chunchao's two sons - Xiang Jianwen and Xiang Jianwu - as actual controllers." The above-mentioned person familiar with Tongling Technology revealed.

Obviously, the compliance process for the above equity structure is not easy.

After finally clearing the biggest "obstacle", why did Tongling Technology, which already had impressive performance, finally give up its GEM listing plan that it had been planning for many years at the last moment when the listing guidance was about to end, and choose to switch to the Beijing Stock Exchange?

On the one hand, Tongling Technology has the prerequisites for listing on the Beijing Stock Exchange. On the other hand, in addition to the strong regulatory policies of Shanghai and Shenzhen A-share IPOs, Tongling Technology may not be able to meet the "three creations and four innovations" positioning attributes of the Growth Enterprise Market, which is also the reason for its sudden change.

"After April 2024, with the release of a series of new IPO policies in line with the new nine national policies, the positioning of the main board, ChiNext, and Science and Technology Innovation Board will become clearer and more stringent. If Tongling Technology continues to apply for the ChiNext, it may lack innovation, which will greatly increase the uncertainty of its secondary listing." The above-mentioned person familiar with the matter admitted.

Although in the past three years, Tongling Technology has met the basic conditions for the "positioning" of the Growth Enterprise Market in terms of R&D expenditure and the number of patents, the "problems" are clearly revealed when looking into the details.

According to data obtained by Kekou Finance, it is an indisputable fact that Tongling Technology's revenue and profits have both increased in the past 2023. However, the astonishing "mobility" of its employee numbers in 2023 is indeed disturbing.

At the beginning of 2023, Tongling Technology had 13 sales staff. During the year, as many as 7 sales staff resigned, plus 4 new employees, by the end of 2023, its sales staff was only 10. Similarly, in mid-2023, the number of its management staff who resigned reached 48, exceeding more than 40% of the total number of management staff at the beginning of 2023. In terms of production staff,

What is more noteworthy is that in mid-2023, there was a large loss of R&D personnel in Tongling Technology.

Data shows that at the beginning of 2023, Tongling Technology had a total of 104 R&D personnel, accounting for approximately 12.66% of its total employees. However, by the end of 2023, a total of 30 R&D personnel had resigned from Tongling Technology. With the addition of 16 new employees, the total number of R&D personnel was reduced to 90. This also means that the proportion of R&D personnel in Tongling Technology's total employees is less than 10%.

The sharp decline in R&D personnel is obviously not a good sign for a company planning to go public on the Growth Enterprise Market.

Tongling Technology also has difficulty retaining highly educated talents.

At the beginning of 2021, there were 20 employees of Tongling Technology with master's degrees, but by the end of 2023, Tongling Technology had only 8 employees with master's degrees.

2) Information disclosure flaws reflect the effectiveness of internal controls

Changing to the Beijing Stock Exchange on the eve of the completion of listing guidance will undoubtedly greatly increase Tongling Technology's chances of successful listing.

According to financial data obtained by Koukou Finance, from 2021 to 2023, Tongling Technology recorded operating income of 852 million, 915 million, and 1.017 billion, respectively, and net profit attributable to shareholders of the parent company was 56.488 million, 65.896 million, and 110 million, respectively.

This series of performance results is obviously more than enough for Tongling Technology to apply for listing on the Beijing Stock Exchange.

However, in addition to examining the growth and sustainability of companies, the Beijing Stock Exchange's requirements for the effectiveness and compliance of internal controls of companies seeking to go public are just as stringent as those in other sectors.

As a public company that has been listed on the New Third Board for nearly ten years, even though its IPO was rejected due to information disclosure issues that year, in recent years, Tongling Technology does not seem to have taken the requirements of completeness and authenticity of information disclosure to heart and truly learned a "bloody" lesson.

In 2022 alone, Tongling Technology, a company listed on the New Third Board, had multiple information disclosure violations and was punished by regulators.

In September 2022, Tongling Technology disclosed several "penalty" announcements from the National Equities Exchange and Quotation Center at one time.

On September 9, 2022, Tongling Technology announced that it had received the "Regulatory Work Notice on Shanghai Tongling Automotive Technology Co., Ltd. and Related Responsible Parties".

In this regulatory work reminder, the Second Department of Listed Company Management of the National Equities Exchange and Quotation Co., Ltd. believes that Tongling Technology is suspected of violating information disclosure regulations.

According to the above-mentioned regulatory work letter, on April 20, 2020, Zheng Xiping, the spouse of Xiang Chunchao, the largest shareholder, controlling shareholder and actual controller of Tongling Technology, purchased 200 shares of the company through a competitive bidding transaction, resulting in an increase in the number of persons acting in concert with the actual controller of the company. Xiang Chunchao's sister Xiang Xiaolan purchased 200 shares of the company through a competitive bidding transaction, resulting in an increase in the number of persons acting in concert with the actual controller of the company. On September 9, 2021, Zhang Na, the spouse of Xiang Jianwu, the son of Xiang Chunchao, purchased 828,700 shares of the company through a block transaction, resulting in an increase in the number of persons acting in concert with the actual controller of the company. On April 14, 2021, Zhang Na increased her shareholding by 479,400 shares, and the shareholding ratio of the actual controller of Tongling Technology and its persons acting in concert changed from 69.60% to 70.63%. In response to the above situation, Tongling Technology did not disclose the announcement of the change of persons acting in concert and the indicative announcement of changes in shareholder shareholdings in a timely manner in accordance with regulations.

In response to this, Tongling Technology said that the relevant responsible persons attach great importance to the supervision of the National Equities Exchange and Quotation Company, and will perform disclosure business in accordance with the requirements of business rules such as the "Corporate Governance Rules" and the "Information Disclosure Rules", ensure that information disclosure is true, accurate, complete and timely, standardize corporate governance, be honest and trustworthy, and standardize operations to prevent such problems from happening again.

The words just said by Tongling Technology, "We will earnestly perform disclosure business, ensure that information disclosure is true, accurate, complete and timely, standardize corporate governance, be honest and trustworthy, and regulate operations to prevent such problems from happening again" are still fresh in our minds.

Immediately afterwards, Tongling Technology released an announcement regarding the company and related entities receiving verbal warnings.

The case involved in this announcement is also suspected violation of information disclosure regulations.

It turned out that on June 20, 2022, Tongling Technology and Dongxing Securities officially signed the "Guidance Agreement between Shanghai Tongling Automotive Technology Co., Ltd. and Dongxing Securities Co., Ltd. on the Initial Public Offering of RMB Ordinary Shares (A Shares) and Listing", and submitted the application materials for guidance filing to the Shanghai Regulatory Bureau of the China Securities Regulatory Commission on June 21. However, as a company listed on the New Third Board, Tongling Technology did not disclose to investors in a timely manner the announcement of the signing of the guidance agreement and the submission of guidance materials to the Securities Regulatory Bureau.

Even earlier, when Tongling Technology was first listed on the New Third Board, it had a history of suspected violations in disclosing information about related transactions.

At the end of 2017, when Tongling Technology's first IPO was reviewed by the board, the IPO review committee pointed out that Tongling Technology had purchased a large amount of goods from its related party Shanghai Kunling in 2014 and 2015, and the related party Shanghai Kunling was one of the issuer's top five suppliers in 2014 and 2015. However, the related transactions between Tongling Technology and Shanghai Kunling during the relevant reporting period were not disclosed during the listing period of the New Third Board.

It is worth mentioning that at the sensitive time when Tongling Technology was about to sign the listing guidance agreement, there was a "farce" in which the family members of its senior executives violated the regulations by short-term buying and selling Tongling Technology stocks.

According to a related announcement released by Tongling Technology on July 4, 2022, Shi Qingqiu, the spouse of the company's Chief Financial Officer and Secretary to the Board Peng Jianping, engaged in short-term trading of the company's stocks.

On April 25 and June 9, 2022, Shi Qingqiu bought 250,000 shares and 100 shares of Tongling Technology through block trading and competitive bidding respectively.

On June 29 and June 30, 2022, some Tongling Technology shares were sold at the high stock price.

The timing of Shi Qingqiu's sale of shares was quite "delicate".

On June 27, 2024, Tongling Technology issued a supplementary announcement stating that it had submitted the registration materials for the initial public offering and listing on the Growth Enterprise Market, and entered the listing guidance stage.

On the first trading day after the announcement, Tongling Technology's share price rose by 16.76%, and on June 29, the increase exceeded 12%. On June 29 and June 30, Shi Qingqiu successively sold some of his shares in Tongling Technology, with the transaction prices being 10.71 yuan per share and 11.64 yuan per share respectively.

However, after the incident, Shi Qingqiu firmly denied that he had used insider information to trade for profit, arguing that it was due to his personal unfamiliarity with relevant regulations and the New Third Board stock operating system.

At that time, Shi Qingqiu's explanation was not recognized by some investors.

After the above incident was announced, an investor left a message in a well-known forum of Tongling Technology saying that "the wife of the senior executive is suspected of insider trading and there are problems with the company's governance."

On July 6, 2022, the Second Department of Listed Company Management of the National Equities Exchange and Quotation issued the "Reminder on the Supervision of Peng Jianping", in which the regulatory authorities issued a reminder on the supervision of Peng Jianping because the financial director and secretary of the board of directors was suspected of short-term trading violations.

In addition to changing the listing destination from the GEM to the Beijing Stock Exchange, Tongling Technology also changed its guidance broker during the listing guidance period.

After signing an agreement with Dongxing Securities in June 2022 to kick off listing guidance targeting the Shenzhen Stock Exchange's ChiNext, in November 2023, Tongling Technology suddenly terminated its ongoing listing guidance with Dongxing Securities and turned to Changjiang Securities, with Changjiang Securities responsible for the promotion of its subsequent listing guidance work.

"The reason for re-signing the coaching agreement with Changjiang Securities was that Dongxing Securities was facing punishment from the regulators for sponsoring Zeda Yisheng's fraudulent listing. In order to avoid being affected, several sponsors of Dongxing Securities chose to collectively jump ship with their projects. The listing project of Tongling Technology was 'led' by several sponsors of Dongxing Securities who were previously responsible for the listing coaching and then jumped ship to Changjiang Securities. Therefore, the arrangement of replacing the coaching securities firm came into being." The above-mentioned person familiar with Tongling Technology revealed to Kekou Finance.

As the above-mentioned person familiar with the matter said, after Changjiang Securities took over the listing project of Tongling Technology, the people dispatched by Changjiang Securities to be responsible for the listing guidance of the project were Wang Rui, Mao Haolie, Zhang Chongjun and others, among which Wang Rui was the leader of the guidance team.

According to Kk Finance, Wang Rui, Mao Haolie, Zhang Chongjun and other three people all have the qualifications of sponsor representatives. They joined Changjiang Securities successively from August to November 2023. Prior to that, the three of them also worked in Dongxing Securities.

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