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Interface News reporter | Pang Yu

On the evening of July 19, *ST Furun (600070.SH) issued a second risk warning announcement regarding the possible delisting of the company's stock due to the share price being lower than 1 yuan.

As of the close of July 19, 2024, the closing price of *ST Furun has been below RMB 1 for 10 consecutive trading days. There are only 10 trading days left before the "face value delisting".

*ST Furun was "branded" after disclosing its 2023 annual report in April this year.

Because the operating income in 2023 was less than 100 million yuan, and the net profit after deducting non-operating items was a loss of 514 million yuan, and at the same time, the 2023 financial report was issued by Asia Pacific (Group) Accounting Firm (Special General Partnership) with an inability to express an opinion, the company was issued a delisting risk warning from April 30, 2024, and the stock abbreviation was changed from "ST Furun" to "*ST Furun".

In addition, *ST Furun’s stock has been labeled “ST” since April 2023. Due to the negative opinion on internal control in 2023, the company’s stock has continued to be subject to other risk warnings since April 30, 2024. After the company received the administrative penalty decision from the China Securities Regulatory Commission on May 17, 2024, it was subject to other risk warnings.

In the secondary market, after experiencing multiple rounds of consecutive limit falls, *ST Furun’s share price fell below 1 yuan for the first time on May 14. Since then, it has repeatedly jumped on the "1 yuan red line" and has been hovering below 1 yuan since July 8.

*ST Furun was formerly a joint-stock company initiated and established by the old Zhejiang Knitting Factory. It mainly engaged in traditional industries such as textiles and printing and dyeing. It was listed on the main board of the Shanghai Stock Exchange in 1997. In 2016, the company began to fully transform into big data and Internet marketing through the acquisition of Hangzhou Taiyizhishang Technology Co., Ltd. (hereinafter referred to as "Taiyizhishang"). In August 2020, the company completely divested its traditional textile main business. At present, the company is mainly engaged in Internet services.

It was the acquisition of Taiyizhishang eight years ago that laid the seeds for *ST Furun’s future difficulties.

Jiemian News reporters noticed that since 2019, *ST Furun has had "non-standard" financial reports for five consecutive years, and non-standard audit opinions have frequently pointed to its subsidiary, Taiyizhishang. In May of this year, this subsidiary was found to have "financial fraud."

Looking back, Taiyizhishang was acquired by *ST Furun during its transformation at the end of 2016. At that time, the book value of Taiyizhishang's net assets was less than 300 million yuan, but *ST Furun spent 1.2 billion yuan to bring it under its umbrella, thus forming nearly 800 million yuan in goodwill.

Although Taiyizhishang fulfilled its performance commitments from 2016 to 2018, a closer look revealed that in 2016, just after Taiyizhishang was consolidated, *ST Furun's accounts receivable increased significantly, from less than 50 million yuan to 456 million yuan, and continued to increase to 609 million yuan in 2017. By 2021, the balance of accounts receivable had reached more than 1.2 billion yuan, accounting for nearly 60% of the company's current assets.

Once the commitment period was over, Taiyizhishang's performance began to decline. Since 2019, the goodwill of 794 million yuan formed by *ST Furun's premium acquisition has been continuously impaired.

Since 2020, *ST Furun has been losing money for four consecutive years, net profits from 2020 to 2023 will be losses of 408 million yuan, 555 million yuan, 586 million yuan, and 568 million yuan respectively. In the first quarter of this year, net profit continued to lose 50.1127 million yuan.

The "Administrative Penalty Decision" issued by the China Securities Regulatory Commission on May 17 this year shows that from January 2020 to the first half of 2022, *ST Furun's subsidiary Taiyizhishang fabricated the advertising agency process and formed an idle agency business without commercial substance in the name of a secondary advertising agency. The company inflated its operating income and operating costs through the aforementioned fictitious business, resulting in false records in the company's 2020 annual report, 2021 annual report and 2022 semi-annual report. From 2020 to the first half of 2022, the company inflated its operating income by a total of 717 million yuan and inflated its operating costs by a total of 716 million yuan.

Before the financial fraud was exposed, *ST Furun was also given a regulatory warning by the Shanghai Stock Exchange due to the company's non-operating funds being misappropriated by related parties. The misappropriation of funds was carried out through the prepayment of business funds to suppliers by Taiyizhishang's subsidiary.

At present, *ST Furun has sounded the alarm for "delisting at par value". The latest announcement shows that as of June 24, 2024, Furun Holding Group Co., Ltd. holds 19.96% of its shares, Zhejiang Zhuji Huifeng Venture Capital Co., Ltd. holds 4.98% of its shares, and the top ten shareholders hold a total of 35.39%. As of the end of the first quarter of this year, the company had a total of 20,039 shareholders.