Guoyuan Securities Faces Scrutiny as 67% of Last Year's IPO Projects Suffer Performance Decline

Deep News11-18

Guoyuan Securities, the lead underwriter for Jingqiang Technology's upcoming IPO review on November 21, is under increasing scrutiny for its investment banking practices. This marks Jingqiang Technology's second IPO attempt after withdrawing its previous application amid market concerns about profitability and cash flow issues.

Recent regulatory actions have highlighted deficiencies in Guoyuan Securities' due diligence processes. Notably, the firm failed to detect clear financial misstatements during its role as independent financial advisor for Fuhuang Steel Structure's acquisition of Zhongke Shijie. The acquisition target allegedly inflated 2024 revenue by 25.19 million yuan (11.36% of total) and profits by 8.98 million yuan (62.82% of total) through premature and delayed revenue recognition practices.

The China Securities Regulatory Commission (CSRC) also reprimanded Guoyuan Securities for inadequate verification procedures during Anxin Electronics' IPO process. Investigators found multiple irregularities in research personnel classification and revenue recognition practices at Anxin Electronics, including: - Employees designated as researchers continuing production work - Discrepancies between internal records and actual department assignments - Inaccurate allocation of working hours between research and production

Guoyuan Securities' 2024 IPO track record shows concerning patterns: - 2 out of 3 newly listed companies (67%) experienced significant profit declines in their first year - All three companies reported year-on-year profit drops in Q1-Q3 2025 - Pre-IPO financials showed suspicious growth patterns: - Hongsifang's profits surged 265% from 2019-2023 before dropping 48.6% post-listing - Huangshan Gujie's profits grew 935% over three years pre-IPO, then fell 29.6% in 2024

Current IPO pipeline projects raise additional concerns: - Jingqiang Technology's negative operating cash flow from 2020-2024 - Jinqiao Deke's questionable 100 million yuan working capital raise despite recent 107.4 million yuan dividends - Xiaoxiao Technology's heavy reliance (69%+ sales) on single client BorgWarner

The firm received an official warning from Anhui CSRC in March regarding inadequate internal controls and due diligence in investment banking operations. Separately, one of its former sponsors faces criminal charges for alleged occupational misconduct.

These developments highlight systemic challenges in Guoyuan Securities' investment banking quality control, from individual project execution to broader compliance frameworks.

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