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China Fund News reporter Wen Xi

Crown Castle, which had just chosen to "check out", was immediately confronted with short-term trading by its new independent director.

On the evening of July 21, Crown Castle disclosed an announcement stating that the securities account of independent director Hu Chao traded the company's stocks from July 2 to July 17, 2024, which constituted short-term trading and also constituted an illegal reduction of holdings.

It is worth noting that this independent director with a Huawei background has been in office at Crown Castle for less than a month. His short-term trading of the company's stocks was around the time when Crown Castle announced the divestiture of its real estate business.

"The account is managed by a friend"

According to the announcement of Crown Castle, the securities account of the company's independent director Hu Chao bought and sold the company's A-share common stock through the securities trading system in a centralized bidding manner from July 2 to July 17, 2024.

Hu Chao's behavior of buying and selling the company's stocks constituted short-term trading and illegal share reduction, and he failed to fulfill his responsibilities of transaction reporting and pre-disclosure.

Crown Castle announced that after learning about the above-mentioned illegal buying and selling of the company's shares, Hu Chao immediately and proactively reported the illegal facts to the company and surrendered to the company all the profits obtained from the aforementioned illegal transactions.

As for the short-term trading behavior, Hu Chao gave the reason: "Due to my busy work, the stock account is managed by a friend, so I was not aware of my friend's operations of his stock account."

Crown Castle said that the above-mentioned stock buying and selling behavior of the securities account did not involve any use of insider information to trade for profit.

At the same time, Hu Chao also promised that the 13,300 shares of the company's stock he currently holds will be voluntarily locked up for 12 months from the time of purchase and will not be sold.

Interestingly, Hu Chao has been in office at Crown Castle for less than a month. On June 27 this year, Crown Castle held its 2023 annual shareholders' meeting and elected members of the company's 12th board of directors and board of supervisors, with Hu Chao serving as an independent director of the 12th board of directors.

In addition to serving as an independent director, Hu Chao also serves as a member of the company's Strategic Committee, Investment Committee, Audit Committee, Nomination Committee, and Compensation and Assessment Committee, and is also the convener of the Nomination Committee.

From his resume, Hu Chao has served as product manager, sales director, director of Huawei France Cybersecurity Office, INP (Integrated Network Planning) strategic consultant, and operations staff of Huawei 5G Strategic Reserve Team, Smart Mining and Sports Health Corps since April 2005. He is currently the operations staff of the Training and Management Office of Huawei Supervisory Board Strategic Reserve Team.

The timing of the transaction is quite sensitive

In fact, for Crown Castle, the short-term trading period of Hu Chao’s securities account is quite sensitive.

According to data, Guancheng Datong was formerly the Fuzhou Electric Wire Factory, which was later restructured into Fuzhou Datong Electromechanical. As it adopted a development model that gave equal importance to real estate and cable businesses, it also reaped the early dividends of the real estate industry.

However, in recent years, the real estate business has held back the company's development. Data shows that Crown City Datong's operating income in 2023 was 9.721 billion yuan, a year-on-year decrease of 12.74%, and its net profit attributable to the parent company was -445 million yuan.

In terms of industries, the electromagnetic wire business has contributed more than 50% of the revenue. Data shows that in 2023, Guancheng Datong's electromagnetic wire business output was 80,500 tons, a year-on-year increase of 3.34%; sales volume was 79,600 tons, a year-on-year increase of 2.71%; main business income was 5.412 billion yuan, a year-on-year increase of 3.32%; net profit was 136 million yuan, a year-on-year increase of 9.68%.

In the same reporting period, Crown Castle's real estate business lost nearly 300 million yuan. In the first half of this year, Crown Castle expects to lose 20 million to 30 million yuan. The main reason for the expected loss is that most of the company's existing real estate business projects are in the final stage, and the settlement scale of high-gross-profit real estate projects in this period is relatively small.

Against the backdrop of declining performance, the company's stock price fell below 2 yuan in February this year, becoming a "one yuan stock."

In order to reverse the situation, Crown Castle officially announced on July 10 that it would completely divest its real estate business and planned to transfer the assets and liabilities related to its real estate development business to the company's controlling shareholder (or an affiliated company designated by the actual controller).

After the transaction is completed, the company will no longer engage in real estate development business, but will focus on the research and development, production and sales of electromagnetic wires. Crown City Datong hopes to optimize its asset-liability structure through this transaction, achieve a thorough industrial transformation, and enhance sustainable development and profitability.

On the day when Crown Castle announced its withdrawal, its share price once fell to the lowest point in recent times, 1.62 yuan per share. However, its share price began to fluctuate the next day. On July 11, Crown Castle's share price hit the daily limit, and one day later, the company's share price also hit the daily limit.

Judging from the timing of short-term transactions, Hu Chao's securities account transactions happened to fall around the time when Crown City Datong announced the "withdrawal". However, his average selling price was not higher than the average buying price of his account in the previous period.

Editor: Xiaomo

Audit: Wooden Fish

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