Sanxie Electric's IPO Eve "Sudden Dividend," Controlling Shareholder Receives 12 Million, Plus an Additional 12 Million in Capital Injection!

Source: IPO Daily

Recently, Changzhou Sxie Motor Co., Ltd. (hereinafter referred to as “Sxie Motor”)’s IPO on the Beijing Stock Exchange has entered the second round of inquiries.

Sxie Motor’s journey to listing has not been smooth.

At the end of 2023, Sxie Motor’s IPO on the Beijing Stock Exchange was accepted. The sponsor was Northeast Securities Co., Ltd. On January 29, Sxie Motor received the Beijing Stock Exchange’s review inquiry letter. On February 27, the company did not respond in a timely manner, but instead stated, “We will apply to postpone by 20 business days, and submit the response to the review inquiry letter to the Beijing Stock Exchange by March 29.” On March 28, Sxie Motor updated an announcement stating that the review would be suspended due to the expiration of the validity period of a financial report application, and it did not respond to the inquiry letter. Until June 24, when the circumstances for halting the review were eliminated, Sxie Motor resumed the review process for its public offering of shares and listing.

In this IPO, Sxie Motor plans to publicly issue 18 million shares, intending to raise RMB 159 million, which will be used respectively for the Sxie green energy-saving intelligent control motor capacity expansion project, the R&D center construction project, and replenishing working capital.

IPO Daily found that on the eve of the IPO, Sxie Motor carried out “rush” dividends. The couple, the controlling actual controllers, received more than RMB 12 million; however, the company raised RMB 12 million to supplement working capital, casting doubt on the rationale for the dividends. In addition, the relationships between the company and its major customers and suppliers are “winding and convoluted,” and the cooperation is “mingled with personal ties.”

Source: Zhang Li

“Rush” dividends on the eve of the IPO

Based on the prospectus, Sxie Motor is a “husband-and-wife business.”

As of the date of signing of this prospectus, Sxie Motor’s controlling shareholder is Sheng Yi, who directly holds 62.97% of the company’s shares; Zhu Shuqing directly holds 19.49% of the company’s shares.

It is understood that Sheng Yi and Zhu Shuqing are a married couple. Therefore, together they control 82.46% of Sxie Motor’s shares, making them the joint actual controlling parties of Sxie Motor.

It is worth noting that on the eve of the IPO, Sxie Motor had conducted a sudden dividend distribution, and most of the dividend funds went into the couple’s “pockets.”

In terms of timing, the dividend distribution time is “intriguing.”

Public information from the Beijing Stock Exchange shows that on December 29, 2023, Sxie Motor’s application was accepted by the Beijing Stock Exchange; meanwhile, information in the prospectus shows that on November 15, 2023, the company held an extraordinary general meeting of shareholders and approved the proposal for the 2023 semi-annual profit distribution plan, with the difference in time being only just over a month.

At the same time, according to information in the prospectus, during the reporting period, Sxie Motor did not conduct any other dividend distributions.

In addition, judging from the dividend amount, Sxie Motor, using the company’s existing total share capital of 38.49M shares as the basis, will increase shares to all shareholders by 3.8 shares for every 10 shares, of which capital surplus funds formed by share issuance premium will also increase by 3.8 shares for every 10 shares; and it will distribute RMB 3.9 in cash for every 10 shares, for a total cash dividend of RMB 15.0092 million. Before the dividend distribution, the company’s total share capital was 38.49M shares, and after the dividend distribution, the total share capital increased to 53.1093 million shares.

Therefore, Sheng Yi and Zhu Shuqing, as a couple, will receive dividend proceeds of RMB 12.3766 million.

Meanwhile, among Sxie Motor’s raised funds, the company plans to use RMB 17.8k to replenish working capital.

First, it distributed more than RMB 19.8k in dividends; then it raised RMB 12 million to replenish working capital—this set of moves is indeed a “coincidence.”

Previously, the CSRC had issued multiple policy documents, further clarifying the requirements for cash dividends by listed companies.

In December 2023, the CSRC issued the “Regulatory Guidance No. 3 for Listed Companies—Cash Dividends of Listed Companies,” further clarifying and encouraging cash dividends and promoting improvements in the level of dividend payouts. In April 2024, the “Several Opinions of the State Council on Strengthening Regulation, Preventing Risks, and Promoting High-Quality Development of the Capital Market” stated that it would “strengthen the regulation of cash dividends by listed companies,” “increase incentives for high-quality companies that pay dividends, and take multiple measures to promote an improvement in the dividend yield,” and “enhance the stability, sustainability, and predictability of dividends, and promote dividend payments multiple times within a year, pre-dividend distributions, and dividend distributions before the Spring Festival.”

Sustained and stable dividend payments help strengthen investors’ returns, promote the establishment of the philosophy of long-term value investing, and facilitate the steady and healthy development of the market. However, “how to distribute dividends,” “how to distribute dividends reasonably,” and whether there is “over-distribution” are also issues that listed companies need to pay attention to.

Business relationships are “winding and convoluted”

The prospectus shows that Sxie Motor was established in 2002. It is a company that develops, manufactures, and sells control motors, whose main products include stepper motors, servo motors, and brushless motors, as well as related supporting products.

From financial data, from 2020 to 2023 January–June (hereinafter referred to as the “reporting period”), Sxie Motor’s operating revenue was RMB 196 million, RMB 282 million, RMB 287 million, and RMB 162 million, respectively; its profits were RMB 22.0665 million, RMB 25.6304 million, RMB 27.0442 million, and RMB 22.2757 million, respectively; and its gross margin rates were 26.95%, 19.92%, 22.31%, and 28.84%, respectively.

IPO Daily found that the relationship between Sxie Motor and its customers and suppliers is “winding and convoluted.”

In terms of gross margin, the company’s gross margin increased significantly in 2023. In 2022 and 2023, Sxie Motor’s consolidated gross margin rates were 22.31% and 28.47%, respectively, while the average consolidated gross margin rates of comparable companies were 25.60% and 25.83%, respectively.

It is understood that Sxie Motor’s main traders are Nanjing Noit Motor & Electrical Equipment Co., Ltd., Hangzhou Aidong Electrical Equipment Co., Ltd., and Changzhou Xiangbo Intelligent Technology Co., Ltd. The proportions of their sales revenue in the traders’ revenue are 96.22%, 91.06%, and 85.22%, respectively. However, Sxie Motor’s gross margin on sales of stepper motors to traders is lower than that of manufacturers, while its gross margin on sales of brushless motors is the opposite.

In terms of procurement and sales amounts, during the reporting period, Sxie Motor’s procurement amount from Chuzhou Hamps was RMB 17.8 thousand, RMB 19.8 thousand, and RMB 11.64 million, respectively; the procurement amount in 2023 increased significantly. Among the top five customers—Hamps and Hefei Bolin—the downstream customers of the issuer are Nanjing Noit, the issuer’s main trader customer. The products Sxie Motor sells to Nanjing Noit are customized products; during the reporting period, Sxie Motor’s sales amounts to Nanjing Noit were RMB 16.3488 million, RMB 16.9724 million, and RMB 10.0963 million, respectively, and the sales amount in 2023 decreased significantly.

In addition, the Beijing Stock Exchange found that the company’s first-largest customer, Leisai Intelligent, indirectly held 9.79% of Sxie Motor’s shares through Wen Zheng Jingming in September 2022. During the reporting period, the company mainly sold stepper motors and brushless motors to Leisai Intelligent, with amounts of RMB 3.2387 million, RMB 12.8583 million, RMB 43.1176 million, and RMB 22.8560 million, respectively, accounting for 1.65%, 4.56%, 15.02%, and 14.08% of the company’s operating revenue, respectively. After the equity investment, transaction amounts increased significantly.

At the same time, Sxie Motor’s main customers such as Hamps are both customers and suppliers. They mainly purchase motor components or motor prototypes for R&D. Meanwhile, Ye Haisen Cheng, general manager of Noit, a major customer of Sxie Motor, was the former person in charge of Sxie Motor’s Nanjing branch company, and he had also invested together with the company’s actual controlling party Sheng Yi in Luoitech.

It is worth noting that Hamps’ actual controller is Wang Hongbo, who invested in Shenzhen Sxie in 2021 and became the general manager of Shenzhen Sxie; Wang Hongbo exited in 2023.

In addition, Changzhou Xiangbo Intelligent (formerly known as Changzhou Sxie Information Technology Co., Ltd.), among the top ten customers, was established in December 2020. From the time it was founded, it had transactions with the company, and in 2021 it entered the company’s top ten customers. According to Tianyancha, Changzhou Xiangbo Intelligent mainly engages in computer, communications, and other electronic equipment manufacturing. Currently, the number of insured employees of the company is 0.

Sxie Motor also has issues with non-compliant financial internal controls.

During the reporting period, Sxie Motor had non-compliant uses of bills, including bill bouncing, bill circulation without real transaction background, bill borrowing, discounting of bills for related parties, endorsement and transfer before customers affix their seals, incorrect bill transfer operations, and other issues.

There is also a case involving a related party of Sxie Motor, Sheng Yueyao, using a personal card to receive supplier sponsorship fees, totaling RMB 197k.

During the reporting period, in the company’s selling expense, there were cases where invoices were issued to the company through Zhuji Rongyi Computer Sock Repair Department (whose main operator was former employee Zhang Rongyi) and payments such as employee compensation, employee rent, and customer sponsorship fees for expenses without invoices were made in the form of reimbursement using invoices.

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Responsible editor: Yang Hongbu