What went wrong? Guizhou Bailing (002424.SZ), known as Guizhou's "first listed ethnic medicine company," and Huachuang Securities, the province's only securities firm, initially joined forces for a bailout collaboration. However, six years later, the two parties are now locked in a legal dispute with conflicting claims.
On December 2, Huachuang Securities issued a statement on its official WeChat account, clarifying media reports about the civil dispute between Guizhou Bailing's major shareholders. The case has already entered judicial proceedings. Back in August, Huachuang Yunxin, the parent company of Huachuang Securities, disclosed that Huachuang Securities had sued Jiang Wei, Guizhou Bailing's controlling shareholder, and his affiliates Jiang Yong and Zhang Jinfen. The lawsuit involves claims totaling 1.4 billion yuan in bailout principal, 361 million yuan in stock pledge financing principal, fixed returns, penalties, and other fees.
Meanwhile, Jiang Wei, the actual controller of Guizhou Bailing, submitted a lengthy complaint to regulators, alleging that Huachuang Securities and its core management sought to seize control of the company under the guise of a bailout. The complaint is now under regulatory investigation.
However, on the evening of December 3, Guizhou Bailing announced that Jiang Wei had received an investigation notice from the China Securities Regulatory Commission (CSRC) for suspected insider trading, disclosure violations, and illegal stock transfers. The company clarified that the investigation targets Jiang Wei personally and will not affect daily operations.
How did a bailout collaboration, initially intended to help a prominent private enterprise under policy guidance, turn into a legal battle with conflicting narratives? Is Huachuang Securities' 1.7 billion yuan claim justified? Are Jiang Wei's allegations of a "power grab" substantiated? What untold truths lie behind this six-year feud?
**From 1.76 Billion Yuan Bailout to Bitter Rivalry** The dispute traces back to a bailout plan six years ago. In 2019, Jiang Wei and his affiliates faced high debt and excessive stock pledges due to investment projects. They brought in Huachuang Securities as a bailout partner through two asset management plans, transferring shares to raise 1.4 billion yuan. Huachuang Securities acquired 161 million shares (11.54% of Guizhou Bailing) and provided an additional 361 million yuan in stock pledge loans backed by 110 million shares.
At the time, Huachuang Securities and its bailout fund explicitly stated they would not seek control of Guizhou Bailing or assist any third party in doing so. Both parties agreed to a strategic partnership for mutual benefit.
The two bailout plans matured in July 2022 and March 2024, while the stock pledge loan was due in August 2024. According to the bailout agreement, the fund had a three-year term, extendable to five years. During this period, Huachuang Securities was to sell its Guizhou Bailing shares via secondary market trading, block trades, or negotiated transfers. A supplementary agreement granted Jiang Wei a priority buyback right. If he failed to repurchase the shares, Huachuang Securities could sell them within 60 days of each maturity date, with Jiang Wei liable for penalties on unsold shares.
Regulatory guidelines required bailout funds to focus on financial investments, avoid seeking control, and ensure clear exit plans. If issues arose, the fund was to communicate with regulators.
However, Jiang Wei neither exercised his buyback right nor paid interest as agreed. Huachuang Securities claims it could not exit due to Jiang Wei's non-compliance, while Jiang Wei accuses Huachuang Securities of violating bailout rules by attempting to seize control.
In August, Huachuang Securities filed lawsuits demanding Jiang Wei repay the 1.4 billion yuan bailout principal, 361 million yuan in stock pledge loans, interest, penalties, and legal fees.
As part of the bailout, Jiang Wei pledged additional collateral, including 78 million shares, properties worth 1.143 billion yuan, receivables, and equity in non-listed companies. The stock pledge loan was backed by 110 million shares and assets worth 263 million yuan.
As of December 3, Guizhou Bailing's shares closed at 5.57 yuan, with a market cap of 7.785 billion yuan. Huachuang Securities holds 349 million shares (including pledged shares), valued at 1.944 billion yuan—exceeding the 1.761 billion yuan in claims. However, pledged shares are subject to market fluctuations.
**Guizhou Bailing's Counterattack** After Huachuang Securities sued, Jiang Wei accused the firm of violating bailout commitments by appointing executives, seizing corporate seals, and attempting a takeover. He demanded Huachuang Securities sell its 160 million shares and compensate for losses caused by its actions.
In January 2021, Huachuang Securities sent a "support team" to oversee key roles at Guizhou Bailing, including directors, supervisors, and financial officers. The team reportedly wielded veto power over decisions by withholding approvals or payments.
Jiang Wei alleged that Huachuang Securities disrupted strategic partnerships, including deals with Sichuan Biopharmaceutical Group and Shandong Trust, by imposing unreasonable conditions or raising compliance concerns.
Legal experts suggest Huachuang Securities' actions may constitute undue interference if proven to exceed financial investment boundaries. Jiang Wei could argue Huachuang Securities breached the agreement first, justifying his non-compliance.
**Huachuang Securities' Financial Performance** Huachuang Securities, Guizhou's sole regional brokerage, reported a 16.34% drop in H1 2025 revenue to 1.193 billion yuan, though net profit rose 11.05% to 191 million yuan. Its proprietary investment business, including bailout projects, remains its largest revenue source despite a 35.7% decline in investment income.
The firm faces risks from non-performing assets, including 720 million yuan in defaulted stock pledge loans. Its legal battle with Guizhou Bailing, involving 1.761 billion yuan, tests its risk management and asset quality.
The outcome will determine whether Huachuang Securities recovers its funds or faces further financial strain.
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