Cinda Securities recently announced plans for a merger with China International Capital Corporation (CICC) and Dongxing Securities, which would mark the end of Cinda Securities as an independent entity. The combined entity would boast assets exceeding one trillion yuan. However, the merger would add little to CICC's pipeline of equity underwriting projects, as Cinda Securities currently has only one such project in its portfolio—a private placement by Beiken Energy Group Co., Ltd.
The private placement plan, approved by Beiken Energy's board on May 7, involves issuing up to 54 million shares to Chen Dong at 6.59 yuan per share, raising a total of 353 million yuan. If the deal goes through, Chen Dong, who currently holds no shares in the company, would become the controlling shareholder with a 21.18% stake, while the current controlling shareholder, Chen Pinggui, would see his stake diluted to 11.15%.
Chen Dong, a former chairman and president of Beiken Energy, has an average annual salary of less than 1 million yuan, raising questions about the source of his 353 million yuan investment. Meanwhile, Chen Pinggui has been actively reducing his stake, cashing out approximately 55 million yuan over the past year. The 2-yuan gap between Chen Pinggui's selling price (around 8.6 yuan) and the private placement price (6.59 yuan) has also drawn scrutiny.
As of November 26, Beiken Energy's stock price stood at 11.88 yuan, offering an 80% arbitrage opportunity compared to the private placement price. If the deal is completed, Chen Dong would see a paper profit of about 280 million yuan. However, the origin of his funding remains unclear, prompting concerns about potential undisclosed arrangements or improper benefits.
In another development, Cinda Securities recently underwrote the IPO of Aomaisheng, a smart manufacturing equipment company. Aomaisheng had previously withdrawn its application for a ChiNext listing in 2022 after a sharp drop in profits. However, its profits surged again in 2023, just in time for its successful application to the Beijing Stock Exchange. Regulatory inspections revealed issues with Aomaisheng's internal controls and financial accounting, raising questions about Cinda Securities' due diligence as the sponsor.
The merger and these underwriting projects highlight the challenges facing Cinda Securities as it navigates a rapidly changing financial landscape.
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