Another China Internet company accused of bad accounting practices. How will market respond?
$SENSETIME-W(00020)$ Shangtang Technology is accused of artificially inflating its revenue through a dubious revenue cycle transfer scheme. Will this lead to huge sale of China concept stocks ? $Alibaba(BABA)$ $TENCENT(00700)$ $BILIBILI-W(09626)$ $MEITUAN-W(03690)$
The report mentions two court cases. These cases show that Shangtang Technology may provide funds to customers directly or through intermediaries, and then customers use these funds to buy products that Shangtang Technology may never have delivered. Additionally, Shangtang Technology is accused of hiding undisclosed affiliates controlled by company executives and senior employees. The company also has a close relationship with the Chinese government for providing facial recognition technology to the Chinese government, and has been blacklisted by the US government as a result. Financially, Shangtang Technology reported revenue of 3.8 billion yuan in 2022, down 19% from 2021, and a loss of 6.1 billion yuan. Industry experts and former technical employees of Shangtang Technology are generally skeptical about the company's prospects
The article proved that Shangtang Technology was shorted from the following aspects:
1. The passage of two legal cases shows that Shangtang Technology may have participated in revenue misstatement and circular transfer schemes.
2. Uncover Shangtang Technology's undisclosed related parties. These related parties are controlled by company executives and senior employees.
3. He pointed out the deep ties between Shangtang Technology and the Chinese government, including facing blacklist restrictions in the US market.
4. Financial analysis shows that Shangtang Technology's core business has suffered serious losses, and accounts cannot be recovered, so revenue may be fictitious.
5. Industry experts and former employees have a negative view of the company's AI technology and business prospects.
6. It pointed out that company insiders are reducing their shareholding, reminding investors to be skeptical about the company's stated prospects of AI technology.
The details of these two cases are as follows:
The first case involved a lawsuit between Beijing Shangtang Technology Development Co., Ltd. as the plaintiff and Jiangsu Jingyida Technology Co., Ltd. as the defendant. Shangtang Company signed a purchase agreement with Jingyida and purchased products worth RMB 10.245,000, but since then Jingyida has not fulfilled the agreement to deliver the products. The court ruled that Jingyida Company has fulfilled the agreement and there is no need to refund the 10.245,000 yuan and interest requested by Shangtang Company.
Details of the second case were not mentioned in the citations, but these court documents seem to suggest that Shangtang Technology has been carrying out false revenue activities. These activities involved revolving transfer payments through a three-party transaction by Shangtang Corporation, which enabled the company to artificially inflate its reported revenue.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
