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The school-run enterprises are facing their twilight years.

1

Limit down

“China’s first listed university” is in trouble.

On August 6, Fudan Fuhua (600624.SH) encountered a limit down at the opening, with the limit down price at 3.5 yuan per share.

In the next two days, the decline did not stop. Pulling out the five-day K-line, it was like walking down the stairs.

Public information shows that Fudan Fuhua was formerly known as Fudan University Technology Development Company, which was founded in 1984. The company was restructured in June 1992 and listed on the Shanghai Stock Exchange in January 1993, becoming the first listed company among universities in China.

Today’s Fudan Fuhua has long lost its glory as “China’s No. 1 university”.As of the close of August 8, 2024, Fudan Fuhua's share price is 3.13 yuan per share. This price has fallen compared to its peak period:

82%。

According to data from Yiniu.com, the historical market value of Fudan Fuhua once reached 11.8 billion, but now it is only 2.143 billion, with a loss of more than 9.6 billion. The evaporated market value can buy 4.5 Fudan Fuhuas.

As the "first stock of Chinese universities", Fudan Fuhua has many followers. According to data from Eastmoney.com, as of the end of March 2024, the number of Fudan Fuhua shareholders was 61,870. These 60,000 shareholders are probably crying in the toilet.

After experiencing such a series of declines, what happened to Fudan Fuhua?

The cause was an announcement. On August 5, Fudan Fuhua announced that the China Securities Regulatory Commission decided to file a case against the company because of suspected violations of laws and regulations in information disclosure.

In the announcement, Fudan Fuhua did not point out the specific details of the investigation, but there were actually signs of this happening a long time ago.

2

"False records for 10 consecutive years"

Back in March 2024, Fudan Fuhua received the "Decision on Taking Corrective Measures against Shanghai Fudan Fuhua Technology Co., Ltd." issued by the Shanghai Securities Regulatory Bureau.

This decision disclosed a piece of important information. The announcement showed that between 2013 and 2017, Fudan Fuhua borrowed a total of 75 million yuan from construction contractors to settle the historical accounts of its joint-stock companies, which was a false settlement. For this reason, the Shanghai Securities Regulatory Bureau determined that:

These acts of concealing liabilities, false settlement of accounts, and improper accounting recognition resulted in false statements in the company's periodic financial reports for the period 2013-2023, in violation of relevant regulations.

In the eyes of the outside world, Fudan Fuhua is really bold to commit financial fraud for 10 consecutive years! Some people in the industry also believe that this incident essentially reveals the potential major loopholes in the company's governance, internal control and information disclosure processes.

Some people believe that the case filed by the China Securities Regulatory Commission against Fudan Fuhua is related to this incident.

It is worth mentioning that the reason why Fudan Fuhua has false financial records for 10 consecutive years is closely related to real estate.

According to the analysis of Phoenix.com's "Fengcaixun", Fudan Fuhua entered the real estate development field in 1994. It has business entities such as Fuhua Real Estate and Fuhua High-tech Park. It has also developed multiple industrial park projects and some residential projects.

But unfortunately, over the years, Fudan Fuhua’s real estate business has not improved much, and has even continued to “lay mines”.

The annual report shows that Fudan Fuhua achieved operating income of 680 million yuan and net profit attributable to shareholders of listed companies of 5.96 million yuan in 2023. According to the latest data, Fudan Fuhua expects to achieve a net profit attributable to shareholders of -22.5 million yuan to -15 million yuan in the first half of 2024, a year-on-year loss.

In addition, the search found that as early as 2016, its holding subsidiary Fudan Fuhua Pharmaceutical received two penalty notices from Shanghai State Taxation Bureau and Shanghai Local Taxation Bureau, with Fuhua Pharmaceutical receiving a total of 266 million yuan in fines. Data shows that this is also the first pharmaceutical company to be caught since the implementation of the "business tax to value-added tax" reform.

Now that it is under regulatory scrutiny, Fudan Fuhua’s road ahead may face more uncertainties.

3

"Super school enterprises" exit

Speaking of which, Fudan Fuhua is not the first well-known school-run enterprise to encounter setbacks.

A classic example is Founder.Founder was born out of Peking University. With its world-leading Chinese character laser typesetting system technology, the company's order value exceeded 100 million yuan in just three years. By the end of 1989, Peking University Founder's Chinese character laser typesetting technology had occupied 99% of the domestic newspaper industry, 90% of the book and periodical publishing industry, and 80% of the overseas Chinese newspaper industry.

After entering the capital market in 1995, Founder began to make computers and once became a domestic computer brand on par with Lenovo. By 2018, Founder Group's annual revenue reached 133.3 billion yuan, ranking 138th in the "Top 500 Chinese Enterprises" and 5th in the "Top 100 Chinese Electronic Information Enterprises". Backed by Peking University, Founder is known as:"The most powerful school-enterprise in China".

At its peak, Founder Group had more than 400 companies, including 6 listed companies, more than 35,000 employees, and total assets of more than 360 billion yuan.

But later, Founder embarked on the path of financial expansion and transformed from a high-tech company into a financial holding consortium, doing everything from real estate and trade to financial securities, medical care, and transportation.

Blind diversification and crazy infighting have turned China's most powerful school-enterprise into "China's worst school-enterprise."In February 2020, without any warning, Founder announced that it would file for bankruptcy reorganization. What crushed Founder was a short-term loan of 2 billion yuan.

It was only then that people discovered that the seemingly glamorous Founder was already riddled with holes. As of the end of 2019, the total debt of the entire Peking University Founder was as high as 303 billion yuan, and the asset-liability ratio reached 83%.

There is also Tsinghua Unigroup.Tsinghua Unigroup was born out of Tsinghua University. As of the end of 2019, the total assets of Tsinghua Unigroup were nearly 300 billion yuan. It is the world's third largest mobile phone chip design company, accounting for more than 20% of the global SIM card chip market share. Like Founder, Tsinghua Unigroup was once known as a benchmark for school-enterprises.

But in the same frenzy of mergers and acquisitions, Tsinghua Unigroup lost its way. The debt scale that skyrocketed nearly 44 times in 8 years became a big mine buried by Tsinghua Unigroup. In mid-2021, Tsinghua Unigroup issued an announcement stating that the creditor Huishang Bank applied to the court for bankruptcy reorganization of Tsinghua Unigroup.

These two university-owned enterprises are not the only ones that have experienced similar fates. Tongfang and TusPark, both of which are Tsinghua-owned enterprises, have also experienced losses and debt defaults.

Statistics show that Tsinghua University once directly or indirectly controlled 89 A-share companies, forming the largest university-affiliated listed company in the A-share market. At the end of 2018, Tsinghua Holdings' total assets reached 517.3 billion yuan. However, after the introduction of the school-enterprise reform policy in 2018, Tsinghua Holdings' total assets once decreased by nearly 90%.

It seems that as a product of a specific historical stage, it is time for school-run enterprises to exit the stage.