Major Shareholder of CNNC HUA YUAN Titanium Dioxide Fined Three Times More Than Xu Jiayin for Violations, Market Outrage!

CNNC HUA YUAN Titanium Dioxide, one of the leading companies in China's titanium dioxide industry, may not have expected to be compared with Evergrande Real Estate, once known as the "first space housing company" and now in trouble.

At a press conference of The State Council Information Office on Sept 24, Wu Qing, chairman of the China Securities Regulatory Commission, stressed that regulatory work must be "toothed and barbed" to ensure a sharp edge. The General Office of the State Council has forwarded the opinions of the CSRC and other five ministries on deepening the comprehensive control of financial fraud in the capital market. By the end of August, 577 cases of securities and futures violations had been investigated and dealt with seriously, especially the typical cases of Evergrande Real Estate and CNNC HUA YUAN Titanium Dioxide, and the Ministry of Finance jointly conducted a strict review of Evergrande Real Estate's auditor Pricewaterhousecoopers, effectively discouraging market violations.

In order to effectively protect the rights and interests of small and medium-sized investors and maintain market stability and fairness, the CSRC has continued to strengthen the supervision of shareholders' holdings reduction, and severely cracked down on illegal holdings reduction, especially for the illegal holdings reduction of "key minorities" such as major shareholders, and resolutely let them bear due legal responsibilities. CNNC HUA YUAN Titanium Dioxide has become one of the focuses of this regulation because its young real controllers have violations, which have not only been named and criticized by the CSRC, but also been mentioned after Evergrande Real Estate in the notification.

Today, CNNC HUA YUAN Titanium Dioxide and Evergrande Real Estate, founded by Xu Jiayin, are clearly not positive reviews. Evergrande Real Estate's current predicament has made it a target of public criticism, mainly because of the extremely bad social impact caused by its events.

According to the CSRC, Evergrande Real Estate inflated its revenue by as much as 564.1 billion yuan in its 2019 and 2020 annual reports. At the same time, in the issuance of a total of 20.8 billion yuan of 5-phase bond documents, these annual reports with false records were cited. The CSRC found that Evergrande inflated its revenue and profits through early recognition of revenue and other means, which constituted a fraudulent bond issuance, and the annual report disclosed by Evergrande had serious false records. In addition, Evergrande Real Estate also has a number of violations such as failure to disclose periodic reports on time, failure to disclose major litigation arbitration and failure to pay off maturing debts.

On May 31, 2024, the CSRC severely punished Evergrande Real Estate for fraudulent bond issuance and information disclosure violations, ordered it to correct and gave it a warning, and imposed a huge fine of 4.175 billion yuan. Xu Jiayin, then chairman and actual controller of Evergrande Real Estate, was fined up to 47 million yuan and banned from entering the securities market for life.

On the other hand, the administrative enforcement situation for the first half of 2024 released by the CSRC on August 16 shows that CNNC HUA YUAN Titanium Dioxide's actual controller, Wang Mou Long, substantially participated in the company's non-public offering activities through complex derivative trading arrangements, and used market margin selling and other means to lock in profits in advance. Disguised circumvention of the restriction period. In this regard, the CSRC fined a total of 133 million yuan for the transfer of shares and related information disclosure violations in violation of restrictive regulations.

According to public information, Wang Zelong was born in 1996 in Jieyang City, Guangdong Province, and graduated from Beijing Film Academy. As early as 2015, while still in school, Wang Zelong subscribed for 53 million shares to be issued by Longbai Group with 1.431 billion yuan. After the expiration of the restriction period, through four reduction operations, its net income exceeded one billion yuan.

In Forbes' list of the world's youngest billionaires in 2021, Wang Zelong, then 24, ranked second with a fortune of $1.5 billion (equivalent to about 10.8 billion yuan), and topped the list in China. In contrast, Xu Jiayin, a 24-year-old "former youth" who had just graduated from college at the time, was assigned to the heat treatment workshop of Henan Wuyang Iron and Steel plant as a worker, and there was no connection with the real estate giant and the richest man.

However, these two people with very different life trajectory, in 2024 due to the CSRC's actions and "the same destination", jointly received regulatory attention.

CNNC HUA YUAN Titanium Dioxide Co., LTD., the full name of CNNC Huayuan Titanium Dioxide Co., Ltd. is one of the leading enterprises in the field of titanium dioxide production in China, and its production capacity is second only to Longbai Group. The company was founded in 2001, and was successfully listed on the Shenzhen Stock Exchange on August 3, 2007. CNNC HUA YUAN Titanium Dioxide focuses on the development and production of high-grade rutile titanium dioxide, and its products are widely used in coating, plastics, rubber, ink, paper and other industries, known as "industrial MSG".

Back in 2019, Wang Zelong invested 1.635.9 billion YUAN to transfer 430.5 million shares from CNNC HUA YUAN Titanium Dioxide controlling shareholder Li Jianfeng, thus becoming the controlling shareholder and actual controller of the company with a shareholding ratio of 27.05%. Since then, its shareholding has climbed to 43.48%, and it still holds 33.45% shares.

The investigation of Wang Zelong by the CSRC stems from his involvement in a private placement of 5.288 billion YUAN in 2023, which can be traced back to CNNC HUA YUAN Titanium Dioxide's financing plan published in 2021. On May 24, 2021, CNNC HUA YUAN Titanium Dioxide announced that it intends to issue 616 million new shares, which is expected to raise 7.091 billion yuan.

On February 24, 2023, CNNC HUA YUAN Titanium Dioxide implemented the financing behavior of non-public offering of shares, and finally reduced the size of the raised capital from the original 7.091 billion yuan to 5.288 billion yuan. The lock-up period for the shares is set to run from February 24 to September 20. During this period, margin lending is considered illegal. However, Wang Zelong sold 88 million shares during the lock-in period, which directly led to a 65% drop in CNNC HUA YUAN Titanium Dioxide2023's first quarter earnings report, and triggered sharp fluctuations in stock prices.

One week after the expiration of the lockup period, on September 27, 2023, CNNC HUA YUAN Titanium Dioxide announced that it intends to use 500 million to 1 billion yuan to repurchase the company's shares, with a buyback period of September 26 to December 25, 2023. Shortly after the release of this announcement, that is, on October 9, 2023, CNNC HUA YUAN Titanium Dioxide faced a huge lifting pressure of 670.5 million shares, and a large number of shares were sold to the market, resulting in a heavy hit to the stock price.

Finally, CNNC HUA YUAN Titanium Dioxide announced on April 2, 2024 that as of March 31, 2024, the company had completed the buyback program, with a cumulative number of 115 million shares repurchased and a total amount of 544 million yuan repurchased.