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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

The recent bull stock Fudan Fuhua (600624.SH) has been investigated by the China Securities Regulatory Commission.

On the evening of August 5, Fudan Fuhua announced that the China Securities Regulatory Commission had decided to file a case against the company because the company was suspected of violating laws and regulations in information disclosure.

Affected by this, Fudan Fuhua's stock price fell to the limit on August 6. However, from July 16 to 25 this year, the company's stock price rose by 52.98%, and it was called a big bull stock.

Previously, Fudan Fuhua had been ordered by regulatory authorities to make corrections as the company’s financial reports had contained financial fraud for 10 consecutive years.

In the first half of this year, Fudan Fuhua suffered losses again. According to the performance forecast, the company expects to achieve a net profit attributable to shareholders of the parent company (hereinafter referred to as "net profit") of a loss of 22.5 million to 15 million yuan.

Surrounded by negative news, how should Fudan Fuhua, once the “No. 1 university stock”, save itself?

False financial statements for 10 consecutive years

An announcement from Fudan Fuhua caused the stock price to drop to the limit.

On the evening of August 5, Fudan Fuhua announced that the China Securities Regulatory Commission decided to file a case against the company due to suspected violations of laws and regulations in information disclosure. During the investigation, the company will actively cooperate with the investigation of the China Securities Regulatory Commission and strictly comply with the provisions of relevant laws and regulations and regulatory requirements to fulfill its information disclosure obligations in a timely manner.

On the morning of August 6, Fudan Fuhua opened at the lower limit and was stuck at the lower limit all day, with the share price at 3.5 yuan per share.

Fudan Fuhua has been investigated by the China Securities Regulatory Commission, but the company has not yet disclosed in the announcement what exactly it is involved in.

In fact, the market has not yet digested the news of Fudan Fuhua’s financial fraud.

On March 18 this year, Fudan Fuhua received the "Decision on Taking Corrective Measures against Shanghai Fudan Fuhua Technology Co., Ltd." (hereinafter referred to as the "Decision") issued by the Shanghai Regulatory Bureau of the China Securities Regulatory Commission, which determined that the company's financial statements contained false statements for 10 consecutive years.

The Decision shows that between 2013 and 2017, Fudan Fuhua borrowed a total of 75 million yuan from the company's construction contractor Shunjie Construction (Group) Co., Ltd. to settle the company's historical defaults by its joint-stock companies Shanghai Gaoxin Real Estate Development Co., Ltd. and Shanghai Fuhua Sino-Japanese Medical Health Industry Development Co., Ltd., and falsely settled the accounts. Of this, 20 million yuan of debt was confirmed by an effective judicial judgment in November 2023, and 55 million yuan was in litigation. In June 2023, Fudan Fuhua, based on the first-instance judgment, set aside 20 million yuan in estimated liabilities, which were fully recognized as current losses.

The Shanghai Securities Regulatory Bureau believes that Fudan Fuhua's concealment of liabilities, false balance of accounts, improper accounting recognition and other behaviors directly led to false records in the company's financial reports from 2013 to 2023. The Shanghai Securities Regulatory Bureau decided to take supervisory and management measures to order the company to correct its mistakes.

In the rectification report, Fudan Fuhua stated that the company has strengthened its study of regulations, standardized its operations in accordance with the law, corrected accounting errors, and retroactively adjusted financial data. It is reported that the company has uniformly retroactively adjusted the matters involved and disclosed them together with the 2023 annual report.

The semi-annual report of the company involving large-scale litigation predicts another loss

Fudan Fuhua, which has been committing financial fraud for 10 years, is under obvious operational pressure.

Fudan Fuhua's predecessor was Fudan University Technology Development Company, which can be traced back to 1984. The company was restructured in 1992. In January 1993, the restructured Fudan Fuhua was listed on the Shanghai Stock Exchange, becoming the first listed company among universities in China.

In 2020, in order to implement the major decisions and arrangements on the institutional reform of enterprises affiliated to higher education institutions, Fudan University will transfer its 18.74% equity in Fudan Fuhua to Fengxian Investment Company free of charge to realize the institutional reform of school-affiliated enterprises.

After the equity transfer, the controlling shareholder of Fudan Fuhua was changed from Fudan University to Fengxian Investment, and the actual controller was changed from the Ministry of Education to the Shanghai Fengxian District State-owned Assets Supervision and Administration Commission.

Fudan Fuhua's main businesses include three major sectors, namely biomedicine, software development and high-tech parks.

According to the annual report, in 2023, the company achieved operating income of 680 million yuan, a year-on-year decrease of 13.86%, and a net profit of 5.96 million yuan. The net profit after deducting non-recurring gains and losses (referred to as "net profit after deducting non-recurring gains and losses") was -22.3078 million yuan.

According to the recently disclosed performance forecast, in the first half of this year, Fudan Fuhua expects its net profit to be between -22.5 million yuan and -15 million yuan, and its non-net profit to be between -24 million yuan and -16 million yuan.

As for the loss, the company explained that the company's holding subsidiary Shanghai Zhonghe Software Co., Ltd. faced the difficulties and challenges brought about by the complex changes in the international environment, actively adjusted its business strategy, and maintained the overall stability of project development and yen sales, but was affected by the continued decline in the yen-RMB exchange rate, and its operating income and net profit fell year-on-year. In addition, affected by changes in pharmaceutical industry policies and the decline in the centralized procurement price and bidding price of some key products, the company's holding subsidiary Shanghai Fudan Fuhua Pharmaceutical's operating income and net profit fell year-on-year.

Fudan Fuhua, which is operating at a loss, is also involved in a large-scale lawsuit.

Fudan Fuhua disclosed an announcement on the progress of the arbitration, showing that on July 16 this year, the company received a legal document from the Shanghai International Economic and Trade Arbitration Commission. The company's arbitration counterclaim application against Tian Xiaoli, Li Hui, Ningbo Free Trade Zone Hengsheng Management Consulting Partnership (Limited Partnership), and Shanghai Baihua Shenchu ​​Medical Technology Co., Ltd. has been accepted, and the amount involved is 100 million yuan.

The dispute stems from Fudan Fuhua's acquisition of a 51% stake in Beautiful Life at the end of April 2022. Beautiful Life is a start-up IVD company founded by Tian Xiaoli.

In April this year, Tian Xiaoli, Li Hui and others filed for arbitration, and the arbitration request included a ruling that Fudan Fuhua compensate Tian Xiaoli, Li Hui and others for direct losses totaling 59.434 million yuan.

With continued losses, what measures will Fudan Fuhua take to save itself?

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