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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

Three people were caught for conspiring with the original actual controller to manipulate the stock price.

On the evening of August 16, the official website of the China Securities Regulatory Commission disclosed that Qi Daguang, the former actual controller and chairman of Langyuan Shares (300175.SZ), conspired with three people to manipulate the stock price of their own company and illegally made more than 100 million yuan in profits. The three were fined about 220 million yuan by the China Securities Regulatory Commission.

According to the CSRC, in 2019 and 2020, because the share price of Langyuan shares fell and there was a risk of liquidation, Qi Daguang conspired with the above three people to manipulate the share price. Since Qi Daguang died before the incident, his administrative responsibility was not pursued.

Langyuan Co., Ltd. entered the A-share market in February 2011. The company is mainly engaged in fresh and dried fruit planting management, processing, warehousing and sales. After listing, its operating performance was not ideal.

In 2018, Langyuan Co., Ltd. crossed the border and acquired 51% of the shares of Guangdong Youshi United Holding Group Co., Ltd. (referred to as "Youshi United") for 209 million yuan to develop its data center business.

However, Langyuan's acquisition was a failure. Not only did Youshi United fail to achieve the promised performance, but it also committed financial fraud for four consecutive years. As a result, Langyuan's operating income continued to decline, and the net profit attributable to the parent company's shareholders (hereinafter referred to as "net profit") was in the red for four consecutive years.

A reporter from the Yangtze Business Daily found that since its listing, Langyuan's shareholders have cashed out about 1 billion yuan through share reduction. Three people who manipulated the stock price were fined more than 200 million yuan.

On August 16, the China Securities Regulatory Commission held a press conference, emphasizing that supervision must be "with fangs and thorns" and must be carried out strictly throughout.

Recently, the China Securities Regulatory Commission issued a series of fines, and many people were punished for insider trading and stock manipulation. On the evening of August 16, the China Securities Regulatory Commission disclosed that Langyuan Shares was among the cases of punishment.

According to the disclosure, in December 2018, Xinjiang Shanglong Equity Investment Management Co., Ltd. (hereinafter referred to as "Xinjiang Shanglong"), the controlling shareholder of Langyuan Shares, pledged 38.63 million shares of Langyuan Shares, accounting for 36.53%. On April 25, 2019, Langyuan Shares disclosed the first quarter report of 2019, showing that the top four shareholders of Langyuan Shares were Xinjiang Shanglong, Yang Mouwei, Wang Mouxiang and Chi Mouzhen, with shareholding ratios of 21.35%, 9.93%, 5.01% and 5.01% respectively. Among them, the securities accounts of "Wang Mouxiang" and "Chi Mouzhen" are controlled by Qi Daguang.

From the end of 2018 to the beginning of 2019, the share price of Langyuan continued to fall, and the Langyuan shares pledged by Qi Daguang were at risk of liquidation. During the process of other shareholders reducing their holdings, Qi Daguang informed Gao Fei, Chi Mouzhen and Wang Mouxiang that they also needed to reduce their holdings. In order to avoid the concentrated reduction of holdings causing the share price of Langyuan to fall too quickly, Qi Daguang asked Gao Fei to find someone to maintain the share price of Langyuan.

Later, Gao Fei found Long Jie, and Qi Daguang, Gao Fei, and Long Jie agreed that Long Jie would arrange funds and securities accounts to undertake the reduction of stocks, and Qi Daguang would transfer a certain amount of funds to Long Jie to be used to borrow securities accounts to maintain the stock price in the secondary market and wait for an opportunity to sell. Qi Daguang also conveyed through Gao Fei that he agreed to Long Jie's request to "share part of the profits." Long Jie also found a partner, You Lifeng, to jointly complete the plan to maintain the stock price in the secondary market.

From September 25, 2019 to August 31, 2020 (referred to as the "manipulation period"), Qi Daguang and Gao Fei provided Long Jie and You Lifeng with approximately RMB 179 million in funds. Through the financing intermediary, Long Jie borrowed from 19 securities accounts including "Jin Mou", and You Lifeng borrowed from 97 securities accounts including "Yao Moubin". Of the funds in the above 118 securities accounts, approximately RMB 350 million was used to trade Langyuan shares.

During the manipulation period, Langyuan shares' share price rose by 66.81%, deviating by 14.77 percentage points from the ChiNext Index during the same period.

During the manipulation period, the above-mentioned accounts bought a total of approximately 336 million shares (including the number of shares purchased in bulk) and sold a total of approximately 307 million shares (including the number of shares sold in bulk). As of March 28, 2022, the above-mentioned accounts no longer hold shares in Langyuan.

It has been calculated that during the manipulation period, after deducting commissions and related taxes and fees, Gao Fei, Long Jie and You Lifeng made a profit of approximately 112 million yuan from manipulating Langyuan shares.

The CSRC believes that the above-mentioned behavior constitutes manipulation of the securities market, among which Qi Daguang and Gao Fei played the main role, and Long Jie and You Lifeng played the secondary role. The CSRC decided that in addition to confiscating the above-mentioned illegal gains, the above-mentioned three persons will be fined a total of 112 million yuan, and the total fines and confiscations will be 224 million yuan.

Continuously loss-making company changes ownership

The stock price manipulation case led by the former actual controller and then chairman Qi Daguang was caused by the sharp drop in the stock price of Langyuan Shares, which was also related to the company's fundamentals.

The candlestick chart shows that on March 10, 2017, the stock price of Langyuan Co., Ltd. reached 19.30 yuan/share during the trading session. On October 19, 2018, it bottomed out at 3.13 yuan/share. In December 2018, the stock price was around 4 yuan, and the range of decline was about 80%.

The sharp drop in stock price is related to the unsatisfactory operating performance of Langyuan Shares.

In 2011, the first year of listing, the company achieved operating income of 471 million yuan and net profit of 58 million yuan. Net profit in 2012 and 2013 dropped to 23 million yuan and 17 million yuan respectively. In 2014, operating income and net profit unexpectedly increased to 809 million yuan and 88 million yuan. In 2015 and 2016, net profit was 36 million yuan and 28 million yuan respectively, which was another two consecutive years of decline. In 2017, net profit was 40 million yuan, but net profit after deducting non-recurring gains and losses (referred to as "net profit after deducting non-recurring gains and losses") was -22 million yuan.

Langyuan Co., Ltd. originally mainly engaged in fresh and dried fruits, with fresh apples and raisins as its main products. In 2018, the company sought to cross-border and raised 209 million yuan of its own funds to acquire a 51% stake in data environment operator Youshi United, laying out its small and medium-sized data business.

UWorld was established on May 18, 2015. One of its main businesses is the full life cycle management service for the data center industry, including data center planning and design, engineering construction, operation and maintenance, cloud computing and value-added services.

In 2017 and the first half of 2018, Youshi United's net profit was RMB 6.33 million and RMB 4.03 million respectively, while the net cash flow from operating activities was RMB 2.91 million and -RMB 22.22 million respectively, which do not match.

At the time of the acquisition, it was questioned by the market and the Shenzhen Stock Exchange issued an "inquiry letter" to Langyuan Co., Ltd.

In 2018, the first year after the acquisition, Youshi United achieved a net profit of 11.1842 million yuan, and began to lose money in 2019. In the following 2020 and 2021, Youshi United failed to achieve the promised performance.

Affected by this, from 2020 to 2023, Langyuan shares suffered losses for four consecutive years, with a total loss of 323 million yuan. In these four years, operating income fluctuated at the 200 million yuan level.

What’s worse is that Youshi United committed financial fraud for four consecutive years from 2017 to 2020.

According to the on-site inspection by the Shandong Securities Regulatory Bureau and the decision to take corrective measures, Youshi United inflated its operating income by a total of RMB 42.1586 million and its inventory by RMB 28.3067 million through false transactions over the past four years.

In order to avoid the risk of delisting, after the incident, Langyuan Co., Ltd. urgently sold Youshi United.

In addition, Wang Guimei and Xinjiang Shanglong entrusted the voting rights of their total 23.95% shares of Langyuan shares to Hangzhou Oriental Xingzhi Equity Investment Fund Partnership (Limited Partnership) to exercise, thereby realizing the transfer of control.

In the future, whether Langyuan Shares can get out of its operating difficulties remains to be seen. A reporter from the Yangtze Business Daily found that from 2012 to 2020, Langyuan Shares' shareholders reduced their holdings through the secondary market, and cashed out a total of about 1 billion yuan.

Among these shareholders who reduced their holdings, the shares held by Yang Jianwei were the shares transferred by Xinjiang Shanglong.