Subsidiary’s hundreds of millions in funds mysteriously disappear, and Shilinmen’s corporate governance faces scrutiny

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Jingjing Reporter Guo Yangchen and Shi Yingjing, Shanghai

A long-established furniture company known as China’s “No. 1 mattress brand”—Joyoung Home Healthy Sleep Technology Co., Ltd. (hereinafter referred to as “Joyoung Home,” 603008.SH) is mired in a controversy over the illegal transfer of funds.

According to Joyoung Home’s announcement, 100 million yuan of funds belonging to its controlling subsidiary, Xitu Technology Co., Ltd. (hereinafter referred to as “Xitu Technology”), were illegally transferred by insiders using their positions. As a result, Joyoung Home has urgently frozen relevant accounts totaling 900 million yuan; the funds involved and the frozen funds combined are approximately 1 billion yuan, accounting for 26.54% of the company’s latest audited net assets and 42.69% of its monetary funds, respectively.

How should the issue of Xitu Technology’s fund transfer be resolved? A reporter from The China Business Journal called Joyoung Home and sent an interview request letter. On March 31, a staff member from Joyoung Home’s Securities Department told the reporter: “At present, the public security authorities are conducting an investigation within Joyoung Home; as for the (Xitu Technology) case, there is still no further clear information. If there is any progress, we will release an announcement immediately.”

On the evening of April 1, Joyoung Home issued multiple announcements and disclosed that the CSRC has simultaneously filed a case for investigation against the company and its actual controller, Chen Ayu; the board of directors voted 6:0 to approve the lawsuit proposal, and in turn demanded repayment of nearly 478 million yuan from the controlling shareholder, bringing the controlling shareholder and Chen Ayu to court. At the same time, all shares held by Chen Ayu have been frozen.

A shockwave caused by a bizarre fund-transfer incident is rapidly spilling over, and Joyoung Home’s corporate governance practices are also being put under deep scrutiny.

Funds involved and frozen funds total approximately 1 billion yuan

The announcement shows that recently, Joyoung Home found that funds in Xitu Technology’s bank accounts were illegally transferred, with the total transferred amount accumulating to 100 million yuan. Relevant personnel are suspected of misappropriating the company’s funds illegally by taking advantage of their positions. To further prevent risks to fund safety and safeguard the safety of the listed company’s funds, Joyoung Home applied to the public security authorities on March 26 for case-filing and investigation.

The reporter learned that Joyoung Home placed protective freezes on the potentially related bank accounts, involving account holders including Hangzhou Xiyue Furniture Sales Co., Ltd. and Shaoxing Xinxiyu Furniture Sales Co., Ltd., with a total freeze amount of approximately 900 million yuan.

Joyoung Home explained that the freezing of the above bank accounts is a proactive protective freeze undertaken by Joyoung Home to protect fund safety, and there is no situation in which a third party has frozen the accounts. This matter may have some impact on Xitu Technology’s normal use of funds in the short term, but after taking into account the company’s cash flow situation comprehensively, it will not temporarily constitute any major adverse impact on the company’s overall production and operations. “The company is currently fully cooperating with the public security authorities to investigate and verify the relevant matters. Under the premise of ensuring the safety of funds in the accounts, it will proceed with the unfreezing work for frozen accounts, and will make every effort to recover illegally transferred funds.”

Relevant information shows that the core entity from which the funds were illegally misappropriated this time—Xitu Technology—is Joyoung Home’s wholly owned subsidiary established in January 2021, with a registered capital of 50 million yuan and its registered location in Xiaoshan District, Hangzhou, Zhejiang Province.

Xitu Technology is the core strategic platform for Joyoung Home’s hotel engineering channel. It is also the sole entity responsible for opening and operating within that channel. Public information indicates that Joyoung Home’s hotel engineering channel has entered into cooperation with brands including InterContinental Hotels (IHG.N), Marriott International (MAR.O), Jinjiang Hotels (600754.SH), Huazhu (HTHT.O), Beijing Capital Hotels (600258.SH), East Present Group, Shangmei, Atour (ATAT.O), Kaiyuan Hotels Group, and Junting Hotel Group-controlled Junlan Resorts, among others. The company has cooperated with more than 3,000 hotels, becoming an important growth point for the company’s business.

However, in 2024 business and industrial information, Xitu Technology had only 8 employees. Yet Xitu Technology’s books show it holds more than 1.97B yuan in monetary funds, accounting for nearly 20% of the total monetary funds combined across all of Joyoung Home’s subsidiaries. Joyoung Home’s 2025 interim report shows that consolidated monetary funds were 1.44B yuan, the parent company held 5.62B yuan, and all subsidiaries together held about 530 million yuan in cash.

In response, the above-mentioned staff member from Joyoung Home’s Securities Department said: “All of these (situations) are still under further investigation. At present, we have not come across any more information.”

It is understood that after the incident in which the above funds were illegally transferred occurred, Joyoung Home quickly carried out a self-audit of fund safety, strengthened its fund safety control system, established communication channels with relevant parties, and is actively negotiating the return of the transferred funds. It will actively cooperate with the public security authorities to handle the case investigation, recover the transferred funds as soon as possible, eliminate unsafe factors in Joyoung Home’s account funds, and ensure the safety of the company’s assets.

Joyoung Home stated that within the company, it will conduct accountability for personnel and internal control rectification, strengthen all directors and senior management personnel, as well as key-post personnel, in learning relevant laws and regulations, enhance the awareness of standardized operations, effectively improve the company’s corporate governance and internal control management capabilities, and strengthen the construction and implementation of internal control systems.

Wage a legal fight against the founder in court

Relevant information shows that Chen Ayu was born in April 1962 in Shaoxing, Zhejiang Province. In 1984, at age 22, he started a small furniture workshop in Shaoxing with 1,000 yuan in initial capital. At that time, domestic beds mainly used hard-board beds and rattan-cotton springless mattresses; “Sealy” (spring mattresses) had just entered China. He judged that “Sealy” would become a major future trend, and gradually shifted toward the mattress sector. In 1988, Chen Ayu officially registered the “Joyoung Home” trademark, meaning “joy brings good fortune at home, and good sleep goes along.”

Entering the 1990s, Joyoung Home gradually grew and expanded, and began operating in a corporate manner. In 2012, Joyoung Home became the first A-share listed company in China’s mattress industry.

It is understood that Joyoung Home displays typical family-controlled and highly concentrated shareholding characteristics. The founder Chen Ayu is the company’s actual controller, and together with his children Chen Yicheng and Chen Pingqi, they are acting in concert. Through two controlling platforms—direct shareholding and Zhejiang Huayi Intelligent Manufacturing Co., Ltd. (hereinafter referred to as “Huayi Intelligent Manufacturing”), and Shaoxing Yuecheng District Huahan Equity Investment Partnership (Limited Partnership) (hereinafter referred to as “Huahan Investment”)—they collectively control more than 35%. Among them, Huayi Intelligent Manufacturing is also Joyoung Home’s controlling shareholder.

More than 10 years after going public, Joyoung Home finally chose to take Chen Ayu to court. On March 31, 2026, Joyoung Home received the “Notice of Case Acceptance” issued by the People’s Court of Yuecheng District, Shaoxing. Joyoung Home and its two wholly owned subsidiaries brought Chen Ayu, Huayi Intelligent Manufacturing, and Huahan Investment to court, alleging disputes arising from damage to the interests of the company.

In its announcement, Joyoung Home laid out the facts. In 2026, for business needs, Joyoung Home borrowed from a bank. Chen Ayu and his related parties occupied funds through a loan-to-loan model using Joyoung Home’s loans; to date, 72 million yuan borrowed via this model has not been repaid.

In addition, during 2025–2026, Joyoung Home carried out factoring financing business. For amounts that Joyoung Home had already paid to suppliers, Chen Ayu’s side, through a factoring financing business model, applied for financing from banks in the name of the suppliers; the funds ultimately flowed to Chen Ayu’s side and his designated accounts. According to preliminary understanding, Chen Ayu’s side obtained funds totaling about 406 million yuan. For the amounts for which those suppliers applied for financing to the bank and which the defendants actually obtained, Joyoung Home would bear the payment obligation.

It is stated that, due to the maturity of certain accounts payable, Joyoung Home and its wholly owned subsidiaries have actually assumed payment obligations to the bank amounting to about 118 million yuan. Adding the unpaid 72 million yuan in loans, the balance of funds non-operationally occupied by the controlling shareholder and its related parties totals 190 million yuan.

Joyoung Home stated that the acts by Chen Ayu, Huayi Intelligent Manufacturing, and Huahan Investment in obtaining funds have seriously damaged Joyoung Home’s interests; therefore, it promptly filed a lawsuit. “The company will also continue to maintain communication with the controlling shareholder and persons acting in concert with it, urge them to resolve the issue of funds occupation as soon as possible by ways such as repaying with cash, asset swaps, and share reductions, and actively promote the progress of this litigation.”

Of note, on the evening of April 1, Joyoung Home issued an announcement stating that due to suspected violations of information disclosure laws and regulations, both Joyoung Home and Chen Ayu have recently received from the CSRC a “Notice of Filing an Case.”

Change name and transform to seek a performance breakthrough

As a traditional furniture manufacturer, Joyoung Home has shown a pattern of “increasing revenue but not increasing profits” in recent years. Financial report data show that from 2020 to 2024, Joyoung Home’s revenue grew gradually from 8.73B yuan to 2.18B yuan, while the parent-attributable net profit fluctuated significantly: 313 million yuan, 559 million yuan, 238 million yuan, 429 million yuan, and 322 million yuan, respectively.

Latest financial report data show that in the third quarter of 2025, Joyoung Home achieved operating revenue of 6.2B yuan, up 7.78% year over year; net profit was 133 million yuan, down 6.1% year over year. For the first three quarters of 2025, operating revenue was 6.196 billion yuan, up 3.68% year over year; net profit was 399 million yuan, up 6.45%.

Against this backdrop, Joyoung Home is actively embracing AI and transforming toward intelligent and tech-driven operations. In January 2026, Joyoung Home decided to change its Chinese name from “Joyoung Home Furniture Co., Ltd.” to “Joyoung Home Healthy Sleep Technology Co., Ltd.”

“The name change mainly considers that Joyoung Home is currently broadly advancing its business strategy transformation, and at this stage it wants to develop more in the direction of intelligence,” said a staff member from Joyoung Home’s Securities Department. “More and more of Joyoung Home’s product R&D is moving toward technology-based sleep solutions. The name change not only aligns with the company’s future development plan, but also with the industry’s overall development trend.”

The reporter learned that Joyoung Home is firmly advancing its strategic transformation from a “traditional furniture manufacturer” to a “supplier of technology-based sleep solutions.”

As for the reasons, Joyoung Home believes, on one hand, that users’ acceptance of intelligent functions is increasing. AI intelligent mattresses with proactive intervention and adaptive adjustment are the direction of future development, but they are currently still at the stage of technical start-up and market education. On the other hand, AI mattresses are not simply “plug-and-play.” They involve full-chain integration of hardware, software, algorithms, and new product standards, requiring long-term technical accumulation and continuous R&D investment. “As technology barriers continue to rise, the industry will accelerate its shakeout; small and mid-sized manufacturers will gradually exit due to a lack of technical groundwork and resource integration capabilities, while leading companies will occupy the dominant position.”

It is stated that by strengthening the foundation of its core mattress business, Joyoung Home has achieved breakthroughs in the smart sleep sector. Based on its self-developed “three-stage sleep-aid theory,” Joyoung Home successfully upgraded core technology modules such as flexible air bladders and intelligent sleep monitoring systems, achieving breakthrough innovations including dynamic adjustment of mattress zones’ softness and firmness and smart adaptation to the sleep environment. Core technologies such as air springs and active sleep assistance have also realized industrialized transformation.

Joyoung Home stated that, supported by its self-developed “air spring” technology, the company has built the adaptive adjustment capability of intelligent mattresses, forming a barrier of core patented technologies. As of the third quarter of 2025, the revenue share of Joyoung Home’s electric intelligent home products exceeded 3%. As the scale expands, the company will gradually enhance its ability to control the entire supply chain. To push forward the transformation, Joyoung Home is also strengthening investment. Joyoung Home stated that in 2023, 2024, and the first three quarters of 2025, the cash outflows from Joyoung Home’s investing activities were mainly related to investment for new capacity layout and intelligent upgrades, specifically including plant and equipment investments in multiple production bases in northern regions, Jiangxi Province, Henan Province, and others, as well as expenditures for constructing and investing in intelligent renovation and upgrade projects at the Henan base.

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