Dongguan Qinshang Optoelectronics Co., Ltd. has recently faced regulatory scrutiny from the China Securities Regulatory Commission (CSRC), which issued an announcement regarding administrative penalties for the company and its personnel, as well as a prior notice of potential market bans due to alleged violations of securities laws.
The penalty results include a lifetime ban on the securities market for Li Xuliang, while Hu Xuanhe faces a five-year ban. According to Article 193 of the Securities Law, the CSRC plans to issue warnings and impose fines: 600,000 yuan on Li Xuliang, 300,000 yuan on Hu Xuanhe, and 100,000 yuan on Chen Yonghong. Additionally, the company itself will be required to make corrections and pay a fine of 600,000 yuan.
The reason behind these penalties is related to improper information disclosure. The CSRC found that the company failed to disclose important details about a major acquisition in a timely manner. Specifically, on September 30, 2016, Qinshang signed an intent letter for the acquisition of Chengdu Qizhong Experimental Middle School but only disclosed this information on March 11, 2017—over five months later. Furthermore, the company made false claims in its April 2017 announcement, stating that the agreement was signed in February 2017, when in fact it had been signed in September 2016.
Legal experts suggest that affected investors may have grounds to claim compensation. Liu Guohua, a lawyer at Guangdong Benben Law Firm, explained that investors who purchased shares between September 30, 2016, and March 11, 2017, or between April 22, 2017, and September 8, 2017, and still hold or sold their shares after those dates, could potentially file civil lawsuits. Based on past court rulings, the likelihood of success for such claims is high, which may lead to a wave of compensation requests against the company.
This is not the first time Qinshang has faced regulatory action. In 2013, the company received an investigation notice from the CSRC for suspected information disclosure violations. Subsequent investigations in 2014 and 2015 led to multiple penalties, including fines and warnings for key executives like Li Xuliang and Hu Xuanhe.
In recent years, Qinshang has attempted to pivot from its semiconductor business to education. Facing declining performance in the lighting sector, the company suspended operations in May 2017 and proposed selling off its semiconductor assets. By 2017, it announced the sale of several subsidiaries, including 90% of Xinqin, 100% of Qinshang Semiconductor, and various equity stakes in other companies.
Over two years, the company invested nearly 7 billion yuan into the education sector, acquiring eight educational firms. However, the transition has not been smooth. For example, the acquisition of Longman Education resulted in a 420 million yuan goodwill impairment and a massive net loss in 2016. Other projects, such as the Chengdu Qizhong Experimental School and Aidi Education acquisitions, have also faced setbacks.
In early 2018, another dispute emerged involving a British education subsidiary, raising further concerns about the challenges of the company's transformation strategy. Despite its ambitious shift, Qinshang’s journey in the education sector remains uncertain and fraught with obstacles.
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