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"After the divestiture of Dong Yuhui, who will pay for the billions of Hong Kong dollars in the decline of the capital market?" After the "breakup" between Yu Minhong and Dong Yuhui came to a temporary end, a shareholder raised the question on social media.

As of the close of July 29, Oriental Selection (01797.HK) closed at HK$9.92, up 4.42%, with a market value of HK$10.23 billion. On the previous trading day (26), Oriental Selection's stock price plummeted 23.39% to HK$9.5, and its market value evaporated by more than HK$2.5 billion in two days. According to Wind data, Oriental Selection's stock price has fallen by more than 64% since the beginning of the year.

The source of the incident was Dong Yuhui's "going solo". On July 25, Oriental Selection announced that Dong Yuhui had decided to no longer serve as an employee of the company and a senior management of a merged affiliated entity of the company. The departure was due to Dong Yuhui's career ambitions, his commitment to other careers and his personal time arrangements, and took effect on the same day. Yu Minhong, the founder of New Oriental and CEO of Oriental Selection, later admitted on social media that he would "give" Dong Yuhui a "following Hui".

The number of fans of Dongfang Zhenxuan and Yuhui Xingtong is also changing. On the 25th, third-party data from the Douyin platform showed that the "Yuhui Xingtong" account gained 100,000 fans, while "Dongfang Zhenxuan" lost 13,000 fans. From July 25 to July 29, Yuhui Xingtong gained a total of 597,000 fans, while Dongfang Zhenxuan lost nearly 98,000 fans. As of 23:00 on July 29, Dongfang Zhenxuan had a total of 29.781 million fans, and Yuhui Xingtong had a total of 22.08 million fans.

Is the divestiture fully compliant?

Yu Minhong and Dong Yuhui broke up, and both parties seemed to have a happy ending, but many shareholders suffered.

In the shareholder conference call on July 26, Yu Minhong specifically expressed his gratitude to all shareholders who have stayed with Dongfang Select. "I know that many of our shareholders have suffered a lot of losses during this period. I hope everyone can trust us again. I believe that in time, we will be able to run the company better."

"If the core asset of a listed company is an employee, what kind of procedural justice should be followed in the process of divesting the value of this employee? Yu Minhong's operation this time is equivalent to cutting off the most precious asset of Oriental Selection. Is this appropriate for a listed company? Does this comply with relevant financial regulations and regulatory requirements?" Dai Bin, who once worked at New Oriental and is currently the chairman of Zhongyi Education and a member of the Guangdong Youth Federation, gave a sharp analysis to the reporter from The Paper on the divestiture of Huitongxing.

Many people in the legal and investment circles also expressed doubts. "From the current public statements, there are still some vague and unclear behaviors in the divestiture of Huitongxing by Oriental Selection." Hu Xue, a lawyer at Shanghai United Law Firm, told the reporter of The Paper, "If the core profitability can be easily divested from a listed company, from a legal perspective, this may be an infringement on shareholders."

"Based on my personal experience, Yu Minhong is a very cautious person. From a legal perspective, I think there should be no problem with this divestiture," Dai Bin said. "In fact, one of Yu Minhong and Dong Yuhui must be responsible for the losses of shareholders. This is why the fans of both sides are still arguing. Yu Minhong and Dong Yuhui are actually two different interest groups, and only one of the two personalities can exist."

Dai Bin analyzed that if Dong Yuhui was determined to leave from the beginning, then Yu Minhong's move should not only not be blamed, but should be praised, because Dongfang Zhenxuan was certain to lose Dong Yuhui, and Yu Minhong secured certain profits for shareholders in a limited time. If it was Yu Minhong who forced Dong Yuhui to leave, then Yu Minhong would bear all the responsibility and be blamed by shareholders.

"The focus of this matter is, as Dong Yuhui is the most precious and valuable asset of Oriental Selection, did he want to leave on his own? Did Yu Minhong retain him, and how much effort did he make to retain him?" Dai Bin pointed out sharply, "If Dong Yuhui wanted to leave on his own, then it is not Yu Minhong who should bear the responsibility for the shareholders' losses, but Dong Yuhui."

Is the pricing reasonable?

Many legal professionals said that many details of Yu Minhong's divestiture of Hui Tongxing are questionable. Take Yu Minhong's initiative to give 140 million yuan of profits to Dong Yuhui as an example. According to Yu Minhong's statement in the telephone conference, "The data we have published is that there is still 140 million yuan of net profit in Hui Tongxing's account. This 140 million yuan is actually the profit that should have belonged to Dongfang Zhenxuan after Yuhui's income was distributed. According to the previous agreement, it means that after Yuhui distributed 50% of the net profit, there was still 140 million yuan of net profit left."

Yu Minhong said that he took the initiative to propose that the 140 million yuan reward that originally belonged to Oriental Selection in the agreement be given to Dong Yuhui.

Zhai Wei, executive director of the Competition Law Research Center of East China University of Political Science and Law, believes that if the following two circumstances exist, then the gift of 140 million yuan in profits to Dong Yuhui is suspected of infringing the interests of small and medium shareholders: First, in the entire process of Yu Minhong making the decision to give away profits, the right to know and the right to raise objections of small and medium shareholders were not guaranteed. Second, from the perspective of "value for money", the entire company's sale price (including the gift of 140 million yuan in profits) was not objectively and fairly evaluated, and seriously deviated from the normal market transaction price level.

In addition, according to the announcement of Oriental Selection, Dong Yuhui (buyer), Beijing New Oriental Xuncheng Network Technology Co., Ltd. (seller) and Yuhui Tongxing (Beijing) Technology Co., Ltd. (target company) entered into a sales agreement. According to which, the seller agreed to sell and the buyer agreed to acquire 100% equity of the target company for RMB 76.5855 million.

On the evening of the 25th, Yu Minhong explained on the social platform, "I arranged the money for Yuhui to buy the company, and the company is a gift to Yuhui." Yu Minhong said that of all the income and profits obtained by Yuhui Tongxing since its establishment, Dongfang Zhenxuan did not take a penny, and left it all to Yuhui and Yuhui Tongxing to support their continued development.

In Hu Xue's opinion, how the price of 76.5855 million yuan was evaluated has not been publicly disclosed so far, and there is also some controversy. "If this price is far lower than the net assets of Yuhui Tongxing, is it reasonable to complete the acquisition at this price?" In his opinion, Yu Minhong's gift, which is considered "righteous" by the outside world, may involve certain risks from the perspective of corporate governance.

Zhai Wei believes that Yu Minhong allowed Dong Yuhui to set up Yuhui Tongxing on his own and gave Yuhui Tongxing to Dong Yuhui, which may also involve legal risks of related-party transactions and insider trading, and may violate Article 22 of the new "Company Law" and relevant regulations on the supervision of listed companies and securities supervision. "In this series of operations, the most contrary to business common sense and normal business logic is that Yu Minhong, as the controlling shareholder of Oriental Selection, took the initiative to give up this core asset owned by Oriental Selection by divesting Yuhui Tongxing, while creating a strong competitor for Oriental Selection. This significantly reduced the goodwill and competitive advantage of Oriental Selection, and also cast a shadow on the future development of Oriental Selection."

Yu Minhong did not give a clear and detailed response to the details of the divestiture of Yuhui Tongxing. He said that he decided to pay the more than 70 million yuan through a certain cooperative relationship between New Oriental and Dong Yuhui. "I won't explain the details, but it complies with all the rules for New Oriental's listing on the US stock market and does not infringe on any personal interests of Dongfang Zhenxuan and Dong Yuhui."

Although the doubts have not subsided, Dai Bin believes that Oriental Selection, which seems to have hit rock bottom, still has great potential for development in the future. "I believe that in the future, with the support of New Oriental, Oriental Selection can have more room for development in the field of education, split into many new cultural self-media accounts, and find new directions. In contrast, Yuhui Xingxing does not have such a deep accumulation."

"Yu Minhong has encountered many public opinion crises because of Oriental Selection, and perhaps this is the lowest point in his life." Dai Bin believes, "And Dong Yuhui's reputation is still very high. He must not make the wrong choice in the future development path, otherwise he may suffer from the backlash of the traffic era. It is not certain who will win or lose between Oriental Selection and Yuhuixingxing."