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the risk of the divorce case of wang jianhua, the actual controller of dingxin communications (603421), suddenly intensified after he continuously failed to perform his information disclosure obligations in accordance with regulations.

divorce litigation risk intensifies

the listed company announced on the evening of september 26 that wang jianhua was sued by his ex-wife zhang qi, requesting to terminate the share holding agreement agreed in the previous divorce agreement and confirming that the above shares were owned by zhang qi. this case involves 46.1324 million shares. based on dingxin communication’s price of 5.78 yuan per share on that day, the market value of the above-mentioned shares corresponds to 267 million yuan, accounting for about 7% of the total share capital. furthermore, zhang qi required wang jianhua and dingxin communications to handle the equity change registration procedures for him and bear the litigation fees and preservation fees.

dingxin communications stated that as of now, the case has not yet been heard, and it is still unable to determine the outcome of the litigation and its impact on the company's current and subsequent profits and losses. there is uncertainty as to whether the rights and interests of the controlling shareholder and actual controller will change. the company's daily operations are currently normal, and the company will fulfill its information disclosure obligations in a timely manner based on the progress of the case.

wang jianhua and zhang qi had signed the "divorce agreement" as early as january 2017, when dingxin communications had just been listed for three months. however, in june this year, disciplinary decisions disclosed by the china securities regulatory commission and the shanghai stock exchange revealed that wang jianhua did not notify the board of directors and fulfill his announcement obligations at that time, and there was a situation where information disclosure was not timely.

according to the "divorce agreement" signed by both parties at the time, of the 108 million shares held by wang jianhua in the company, 32.9517 million shares were owned by zhang qi (accounting for 7.60% of the company's total share capital at that time), and the remainder belonged to wang jianhua. in order to ensure the stability of the company's production and operation and avoid adverse effects on the company due to changes in shares, both parties agreed not to deliver the 32.9517 million shares, and zhang qi entrusted wang jianhua to exercise all shareholder rights for these shares. the entrustment period is 15 years. .

in addition to the share split agreement, the "divorce agreement" also stipulated that wang jianhua also agreed that one-third of his salary income after the divorce would be owned by zhang qi, and promised to pay zhang qi 100 million yuan in cash or shares of equivalent value in 2025. .

this "divorce agreement" was not exposed until february this year, when 14.0791 million shares of the company held by wang jianhua were judicially frozen. the reason why the shares were frozen this time was the civil property dispute arising from the divorce distribution agreement between wang jianhua and zhang qi.at the end of august this year, the number of wang jianhua's frozen shares further increased to 46.1324 million shares, accounting for 7.07% of the company's total share capital.

continuous violations

dingxin communications, which specializes in smart grid and fire alarm industries, is under pressure this year. the company's operating income in the first half of the year was 1.436 billion yuan, and its net profit was a loss of 48.648 million yuan, turning from profit to loss year-on-year.

the core reason for the decline in dingxin communications' performance is another disciplinary violation - due to the company's suspected violations, state grid decided to launch a bidding and procurement "circuit breaker mechanism" for all the company's procurement categories from february 18, 2024, and the company launched an investigation into suspected violations. during the circuit breaker period, the company's bid-winning qualifications for all products and services will be suspended. on july 29, dingxin communications received a blacklist warning from china southern power grid co., ltd. the warning period and final outcome are temporarily uncertain.

state grid is dingxin communications' core customer. the company's winning bid from state grid in 2022 was 1.651 billion yuan, accounting for 53% of that year's operating income. this circuit breaker notice not only caused a decline in performance, but also affected many financial indicators:

affected by the penalties imposed by the state grid, the future cash flow of the subsidiary qingdao dingxuan electric co., ltd. is expected to decline. the company conducted an impairment test on its goodwill, and the goodwill was impaired;

the company carefully reviewed the business market environment and appropriately increased the amount of bad debt provisions based on the expected credit loss model;

conducting a price drop test on inventory. the finished products planned to be sold to state grid among the inventory products were not supported by orders and prices dropped;

the company no longer sells r&d trial products, and related inventories have fallen in price.

however, dingxin communications once again failed to fulfill its obligation to disclose this important news in a timely manner. dingxin communications became aware of the "circuit breaker" information on february 27, 2024, but the company did not issue a temporary announcement to disclose the above matters until the evening of march 29, 2024. this case was combined with undisclosed matters in the divorce case. after filing an investigation, the china securities regulatory commission decided to give dingxin communications a warning and impose a fine of 700,000 yuan; wang jianhua and four others were given a warning and fines ranging from 250,000 yuan to 1 million yuan. fines vary.

the china securities regulatory commission clearly pointed out in its review of administrative enforcement in the first half of the year that investors are buying listed companies when they buy stocks, and the assets, operations, financial and other information publicly disclosed by listed companies must be true, accurate and complete. financial fraud and other illegal information disclosure activities use false information to cover up "quality problems", causing investors' investments to be "wrong", seriously disrupting the order of the capital market and shaking investor confidence.