Dongguan Qinshang Optoelectronics Co., Ltd. has recently been hit with a regulatory crackdown from the China Securities Regulatory Commission (CSRC). The company and several of its key personnel have received administrative penalties for alleged violations of securities laws, including a lifetime ban on Li Xuliang from the securities market.
According to the CSRC’s announcement, the company will face corrective measures, warnings, and a fine of 600,000 yuan. Li Xuliang, who is now banned from the securities market for life, was also fined 600,000 yuan. Hu Xuanhe and Chen Yonghong received fines of 300,000 and 100,000 yuan respectively, along with warnings. In addition, Hu Xuanhe will be barred from the securities market for five years.
The punishment stems from two major violations related to information disclosure. First, the company failed to disclose critical details about a potential acquisition of Chengdu Qizhong Experimental Middle School in a timely manner. The deal, which was signed on September 30, 2016, was only announced on March 11, 2017—well after it should have been disclosed. Second, the company made false claims in an April 2017 announcement, stating that the acquisition agreement had been signed in February 2017, when in fact it had already been finalized 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 specific time periods could potentially sue for damages. These include those who bought shares between September 30, 2016, and March 11, 2017, and those who bought between April 22, 2017, and September 8, 2017. Given past court rulings, the likelihood of success in such lawsuits appears high, which could lead to a wave of legal actions against the company.
This is not the first time Qinshang has faced regulatory scrutiny. Since 2013, the company has repeatedly been investigated for suspected information disclosure violations. In 2014, it received an administrative penalty for failing to disclose non-operational capital flows. Over the years, multiple executives have been warned or fined, indicating a pattern of misconduct.
In recent years, Qinshang has attempted to pivot from its semiconductor lighting business to education. After a decline in semiconductor performance, the company began a strategic shift toward education in 2015. It suspended operations in May 2017 to divest its semiconductor assets and focused on acquiring educational companies. By 2017, it had invested over 6.8 billion yuan in the sector, acquiring eight education firms.
However, the transition has not been smooth. For instance, the acquisition of Longman Education led to a massive goodwill impairment in 2016, resulting in a significant net loss. Other deals, such as the failed Chengdu Qizhong acquisition and the stalled Aidi Education deal, have further complicated the company's efforts. Additionally, a dispute over equity in a British education subsidiary has added to the challenges.
Despite these setbacks, Qinshang continues to push forward with its transformation, but the path has proven difficult. As it faces legal consequences and struggles with its new direction, the future of the company remains uncertain.
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