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Rui Xing "self exploding", the next music?

iresearch21cn @ 2020/04/03

Author: Li Xiaolei, Wang Lin, Zhou Xiaoqi
Source: Tech planet (WeChat ID:tech618)

If 2000 -2010 is the ten year of the vigorous development of PC Internet, then 2010 -2020 is the golden age of mobile Internet development. 2020 is coming. What new opportunities will the technology Internet industry emerge in the next 10 years?

Rui Xing coffee has set up a company to set up the fastest record of IPO in 18 months. Less than a year after its listing in the US, in April 2, 2020, Rui Xing announced a "forged 2 billion 200 million yuan trading" internal investigation report, and its share price was flashing at the fastest speed, 5 times in 40 minutes, the stock price plummeted 78%, and over 30 billion of the market value evaporated.

Rui Xing coffee is born out of the Shenzhou system. CEO Qian Zhi Ya is the trader of Rui Xing coffee. Chairman Lu Zhengyao and his old partner Li Hui and Liu Erhai are invisible behind the scenes.

After the incident, Rui Xing plate plummeted 81.22% before the intraday crash of 85%, as of the deadline, Rui Xing market value fell to $1 billion 697 million all the way.

Why does Rui Xing take the initiative to expose its own trading data fraud? What is the reason behind the operation? What ripple effect will Rui Xing share price collapse bring? Will Rui be the next music player? Will Lu Zheng Yao be the next Jia Yue Ting?

Rui suddenly exposes "forgery 2 billion 200 million transaction volume".

In January 31, 2020, the "muddy water research MuddyWatersResearch" issued by the investigative body, which issued a short selling report, led to a tsunami of capital and public opinion. But at that time, Rui Xing denied all of this.

After two months, Rui Xing coffee has staged an unprecedented exposure.

In April 2nd, a special committee of three independent directors of Rui Xing coffee was responsible for overseeing some problems in the consolidated financial statements during the fiscal year ended December 31, 2019 and conducting an internal investigation.

The survey results showed that the total sales volume related to false transactions from the second quarter of 2019 to the fourth quarter of 2019 was about 2 billion 200 million yuan, and the related expenses and expenses were inflated.

The cause of the false trading is directed at COO, chief executive officer and director Liu Jian and several employees who report to him. According to the internal investigation report released by Rui Xing, from the second quarter of 2019, relevant personnel engaged in misconduct, including forging some transactions. The special committee recommends the adoption of certain temporary remedies, including the suspension of such employees as Liu Jian and suspected misconduct, and the suspension of contracts and transactions with the identified fraudulent parties involved.

Liu Jian and Qian Zhi Ya were also born in Shenzhou. From 2008 to 2015, Liu Jian served as deputy director and income management director of Shenzhou renting vehicle management center. He served as head of revenue management in Shenzhou from 2015 to 2018, and served as Rui Xing coffee COO in May 2018.

Closely related to Rui Xing and Lu Zhengyao, Liu Erhai, founder and executive partner of pleasure capital, revealed that he held more than 5% stake in Rui Xing coffee.

Snowball user Ricky announced that a few days ago, Rui Xing's remuneration committee Liu Erhai had left. Reporters in this regard to Liu Erhai and joyful capital verification, pleasant capital public relations official reply said: "Rui Xing is a public company, all the above city companies announcement is the standard."

It is worth noting that in the 89 page report of muddy water research, 5 SmokingGun Evidence (authentic evidence) and 6 Redflag (hazard warnings) were listed, pointing out that Rui Xing coffee made up the company's financial and operational data. At the same time, its business basically collapsed and there were inherent defects in its business model.

The muddy water report said that it sent 92 full-time and 1418 part-time inspectors to spend more than 900 places in the country, and collected 25843 shopping tickets, a large number of internal WeChat chat records, and business and information related to people and enterprises, and recorded 11260 hours of store videos. The final analysis is that in the third quarter and the fourth quarter of 2019, each store sold at least 69% and 88% of its single day sales.

Subsequently, Rui Xing coffee issued an open letter, strongly denying all the allegations of the anonymous report. It is claimed that the evidence contained in the report is unsubstantiated and the allegations in the report are based on unfounded speculation and malicious interpretation of the incident.

Take the initiative to avoid bankruptcy and liquidation?

Rui Xing coffee first denies, then exposes counterfeit, maybe there are reasons.

In April 2nd, a number of law firms in the United States issued a statement to remind investors that the group action on Rui Xing coffee was about to arrive at the deadline for final submission.

Guo Shiliang, financial analyst Reporter It is indicated that if a claim is made to a listed company, a prerequisite for compensation should be established before that. For the US stock market, the key to direct collective action is the law firm. The efficiency of the class action initiated by the law is even higher, and the impact on the enterprise is greater.

It is worth noting that in the United States, if an investor sues a listed company on an event, as long as the investor wins the lawsuit, investors will be compensated for the same reason. If the circumstances are serious, it is possible for the defendant to go bankrupt and liquidate.

It is understood that at present, GPM, Schall, California, Gross, Faruqi, Rosen and Pomerantz in New York have indicated that investors who bought Rui Xing coffee shares between November 13, 2019 and January 2020 could contact the law firm if they tried to recover their losses. That is to say, the law firm will initiate class action on behalf of investors, and April 13, 2020 is the deadline for class action of chief plaintiff (Rui Xing coffee).

"Overseas shorting agencies, seeing that Rui Xing is subject to class action, may be followed up in time, which will directly affect the reputation of Rui's accumulated years." Financial analyst Guo Shiliang said.

Not only in the US stock market, but also in Hongkong, China. according to Reporter It is understood that the Ruijin mining industry, which landed on the Hong Kong Stock Exchange in 2009, was ordered to be suspended and dealt with by the Hongkong Securities Regulatory Commission due to a major shareholder's violation of the shares.

Similarly, in 2014, Tianhe chemical company, which was listed on the Hong Kong stock exchange, was hit by short selling agencies for less than three months, accusing its accounts of counterfeiting, exaggerating profits and untrustworthy relations with customers, which resulted in the suspension of Tianhe chemical industry. The accusation against Rui Xing coffee is almost the same.

According to this calculation, Rui Xing coffee voluntarily detonate itself before the deadline for class action, which is most likely to protect itself from bankruptcy and liquidation.

Guo Shiliang said that if Rui lucky in the follow-up annual report to produce more sufficient data to prove the company's business model, the stock price may usher in an inflection point.

Otherwise, Rui Xing coffee may trigger a dollar delisting system.

The Nasdaq market stipulates that the share price of a listed company falls below a dollar and the state lasts 30 trading days. The Nasdaq market will issue a warning of loss. If a warning company fails to take corresponding measures to save itself in the 90 days of the warning, it will be declared to stop trading.

In 2011, 24 Chinese stocks listed in the US fell into a delisting crisis due to below $1 share.

However, this is not because the capital market is not optimistic about the stock price plunged, but because of trading data fraud led to its share price plummeting.

"The punishment in overseas markets is very strict. Once the financial fraud is determined, it will not only face the risk of delisting, but also face many investors' claims, and even lead to the ruin of enterprises," Guo Shiliang said.

Earlier, similar incidents took place in the US stock market. In 2001, the financial fraud of Enron Corp directly led to its bankruptcy. The company CEO Jeffrey Skilling was sentenced to 24 years and fined 45 million dollars. The financial planner was sentenced to 6 years' imprisonment and fined 23 million 800 thousand dollars, and a full range of compensation for investors' losses of up to $7 billion 140 million and a series of penalties.

Rui Xing coffee announced voluntarily the trading data fraud, in order to take the initiative to protect themselves, or passive exposure? Perhaps only the core executives of Qian Zhi Ya and other companies will know.

Will it become the next music?

Lu Zhengyao, who was born in Shenzhou, once again introduced Rui Xing coffee to the public market. After seeing the air gap, setting up a company, financing a huge sum of money and expanding the money, he quickly sought IPO.

Many people think that this lightning strategy is very effective, but the thunder burst through the capital fuelled bubble. Rui Xing's story of ups and downs is hard not to be associated with Jia Yueting and his music vision.

In August 12, 2010, LETV landed on the gem, which rose 47.12% on the opening day, becoming the first video industry in China. In the 7 years since its listing, music has been consolidated to 30 billion 77 million yuan. Jia Yueting, founder of music, also started the "ecological reverse".

When music is listed, Huaxing capital CEO Bao once said: "a ranked 17 video website, but the industry's first financial indicators, magic tricks." Since then, in May 2015, there was an article in the snowball network that questioned music as serious water injection in the 2014 annual report. In June, Yang Xiaolei, an analyst with Southern China fund, publicly questioned the annual report of LETV in 2014.

Since then, in July 6, 2017, Jia Yueting published the article "I will do my duty" on his personal public account. The music is almost made public by the fact that the capital chain is almost broken.

According to music executives at the time of the market brand. Reporter At that time, we all advised Jia Yueting not to publish, after the announcement, the market will have a devastating blow to the confidence of the enterprise.

But at that time, Jia Yueting knew that things were irreversible. After that, a series of incidents of resigning and leaving the United States were well known. Today, music shows 2019 net loss of 11 billion 282 million yuan, the company's stock is listed on the Shenzhen stock exchange to terminate the risk of listing.

There are many similarities between music's story and Rui Xing. After the listing, share prices soared and fell into the abyss.

In May 18, 2019, Rui Xing coffee rose 19.88% on the first day of its listing, to $20.38, with a total market capitalization of $4 billion 740 million. A cup of coffee sold nearly 5 billion dollars in market value.

In January 11, 2020, Rui Xing coffee completed the issuance and issuance of convertible bonds, raising the scale of over $1 billion 100 million. Among them, Rui Xing coffee giant shareholders capital cash 230 million U.S. dollars, Rui Xing coffee company financing $900 million. Rui Xing IPO fundraising for $695 million, fund-raising scale exceeds the financing of IPO.

In the early February, the muddy water research group issued a short report, claiming that it had fraud and fraud on its business data.

Ruixing first denied it firmly. However, two months later, he finally revealed the fraud and submitted a report issued by the internal special investigation committee. He said that the volume of RMB transactions increased by 2 billion 200 million yuan in the two quarter to the fourth quarter of 2019.

Who will Domino fall down to?

Behind every enterprise there are complex ecological chains, and so is Rui Xing. Today, Rui Xing has been exposed to 2 billion 900 million of the revenue in 2 billion 200 million of counterfeit, many Nino dominoes fell the first piece, behind its ecological chain, investors, shareholders and so on will naturally be affected.

First, Rui has over 12 thousand full-time employees, and tens of thousands of part-time employees. Today, financial fraud and investors are initiating a class action lawsuit. Rui Xing will face huge compensation. Will there be massive layoffs? Can employees' salaries be distributed?

Second, Rui Xing said in July last year that there were 3000 coffee shops under the line, and planned to have 4500 stores by the end of 2019. If Rui Xing really achieved this goal, would he be able to afford the rents of 4500 stores now?

Third, Ruixing stores are equipped with specialized coffee machines. At the same time, last year, Ruixing was constantly expanding its category, from light food and nuts to small deer tea. Today, suppliers will not naturally deliver the goods. It is very likely that there will be accounts payable runs. But Rui Xing has the strength to compensate suppliers?

Fourth, last year, Rui Xing launched a new brand of deer tea, which is different from coffee products in China's second tier cities to open the market through direct camp mode.

Rui Xing and franchisee have a clear division of labor: Rui Xing is mainly responsible for providing users with drainage, technology, supply chain and products; franchisees are mainly responsible for location shop rental, decoration, employees and daily operations. Early income mainly belongs to franchisees. With the increase of the proportion of store revenue, Rui Xing's income ratio has increased.

In November 5, 2019, luckintea announced that it had reached more than 50 stores nationwide.

Now, Ruixin is facing a crisis. Can it continue to give the franchisee of the deer tea? If not, will these franchisees face bankruptcy?

Fifthly, can Singapore's government funds and other institutional investors exit as usual?

In June 2018, Ruixing coffee received a loan of 300 million yuan to Tibet trust, with a term of two years (expiring in June 2020) with an annual interest rate of 8%. To this end, Lu Zheng Yao has secured a 48% stake in a wholly foreign-owned company under the Rui Xing coffee VIE structure.

At present, only 5% of shareholders of Rui Xing coffee holdings, only one institutional investor of the Singapore government fund, owns a stake in Rui Xing coffee 7.15% (January 2020 data). It is reported that Singapore Government Investment Company (GIC) has been passed on as LP of Dali capital, and Li Hui is a founding partner of Dali capital. He and Liu Erhai, Lu Zheng Yao have jointly created the miracle of Shenzhou.

Does he have enough capital to repay the loan from Tibet trust? Can the Singapore government fund get investment returns or even exit as usual?

Six, will the reputation of CICC and its roots be damaged?

In the list of Rui's sponsor, there are CICC who once appeared in Rui Xing B round of financing, and Li Hui Stanley Morgan Stanley, the former owner of the company's financial fraud, his reputation may be damaged.

Seventh, will it affect Shenzhou rentals and Shenzhou superior cars?

In 2017, Rui Xing coffee made 4 loans to Lu Zhengyao's company, Qian Zhi ya, director Chen Min and so on, totaling 382 million yuan. All these loans were exempted from interest for a period of one year. In 2018, Rui Xing coffee also applied for a 148 million yuan interest free loan to Lu Zhengyao's company.

More importantly, today, the largest shareholder of Rui Xing coffee is still Lu Zhengyao, whose shareholding ratio is as high as 23.94%. Once Rui Xing collapses, can the stock price of Shenzhou excellent car and Shenzhou rente be able to bear? Is the capital chain sound?

Eight, will it bring disaster to Lu Zhengyao's treasure car?

In March 2019, Lu Zheng Yao bought an old German auto company's Po Po control stake for 4 billion 100 million yuan. The acquisition of Bao Wo was opposed by two major shareholders of Shenzhou.

Lu Zhengyao's acquisition of Po Wo did not make money. In 2018, the annual sales volume of Bao Wo dropped by 25.7% to 32942 vehicles, accompanied by high losses and liabilities.

But this did not dispel Lu Zhengyao's idea. He hoped that the Shenzhou auto buying channel and Po Wo channel will be deeply integrated in the future. There is only one channel. The existing 4S shop will be transformed into the flagship store.

Nine, will the impact affect China's stock market?

Guo Shiliang said that once the financial incident of Rui Xing coffee is implemented, it is likely to cause a major blow to the internal control system of China's stock market and even affect the whole stock market.

Before listing, Lu Zhengyao formed related transactions through various forms of loans in the form of loans, reducing financing costs, providing start-up funds for Rui Xing coffee, allowing Rui Xing to become a thoroughly financing giant. Two years after its establishment, Rui Xing raised $750 million through equity financing and accumulated 1 billion 285 million yuan through various loans.

Today, Rui Xing and the Shenzhou excellent cars listed in 2016, and the Shenzhou renting cars listed in 2014 are highly similar. They have lifted the ban on the 120 trading days, lifted the 45 trading days to the highest point, and completed the issuance + reduction of cash in the vicinity of the high point.

Lu Zhengyao and the circle behind him have done three capital games in such a way. Can such a game continue in the future, will Lu Zhengyao face credit failure like Jia Yueting?

Perhaps the avalanche and Domino caused by this have just begun.

Header source network
* this is an independent view of the author and does not represent AI's position.

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Source: Planet Tech