Tianhai Automotive Electronics Group Co., Ltd. disclosed its first-round inquiry response letter on the Shenzhen Stock Exchange on December 2, 2025. However, shortly after releasing its prospectus in June this year, the company was reported to the China Securities Regulatory Commission (CSRC) by whistleblowers.
According to the allegations, Tianhai Electronics concealed that its former overseas business head, Lan Jun, held dual Chinese-American citizenship—a violation of regulations. The company allegedly permitted Lan to register as a shareholder in employee stock ownership platforms using his Chinese ID despite knowing his foreign nationality.
In September 2025, lead underwriter China Merchants Securities (CMS) interviewed Lan and confirmed his dual citizenship during his tenure and participation in equity incentives. However, CMS failed to disclose this material risk—potential shareholder disqualification or changes—in the prospectus or subsequent filings.
The prospectus shows Tianhai Electronics raised 2.46 billion yuan via its IPO, issuing 49.55 million shares (≥10% of post-IPO equity), implying a 24.6 billion yuan valuation. Employee platform Hebi Juxian holds a 3.6044% stake (≈887 million yuan), with Lan’s share once valued near 100 million yuan.
Whistleblowers revealed Lan served as overseas head for over a decade until 2019 and obtained U.S. citizenship before Hebi Juxian’s 2017 incorporation. Tianhai allegedly allowed his improper ID-based registration. Notably, Lan reduced his stake by 436,621 yuan in 2024, but this adjustment was omitted from disclosure documents.
Lan previously led TENA (Tianhai Electric North America), Tianhai’s North American subsidiary, which was sold to AE in December 2021 amid 128 million yuan in unresolved receivables. Curiously, Tianhai continued transacting with TENA post-sale, raising governance concerns.
During CMS’s September interview, Lan admitted obtaining U.S. citizenship in 2009 for business travel while retaining his Chinese ID, claiming ignorance of nationality laws. He founded multiple U.S. entities for Tianhai, including TENA in 2009.
Key issues remain unresolved: 1. China’s Nationality Law voids citizenship upon foreign naturalization, making Lan’s ID invalid for registration. 2. Hebi Juxian should have been registered as a foreign-invested partnership per regulations. 3. Tianhai’s prospectus omitted these material compliance risks despite management’s awareness.
Internal chats suggest executives knew Lan’s shareholding could be invalidated, yet no corrective disclosures were made. The Shenzhen exchange’s next steps—potential prospectus revisions or sanctions against CMS for due diligence failures—are pending.
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