Tongjitang was originally a business engaged in the distribution of medicines and treating diseases and saving lives. However, due to frequent exposures of controlling shareholders occupying company funds, illegal guarantees, and illegal disclosures, the company has become a company with a reputation and a plummeting stock price. A shares are “poison”.
Loss of internal control often triggers thunderous explosions
One wave is not over, but another wave is rising.
Recently, it has been revealed that *ST Jitang (600090.SH) has failed to perform internal approval and decision-making procedures. The company has illegally provided external guarantees and has been involved in lawsuits.
In September 2018, the controlling shareholder Tongjitang Technology, a subsidiary of Tongjitang, signed an agreement with Juzhou Asset to invest 200 million yuan in private hospitals from Juzhou Asset. The listed company signed a commitment letter to make up the difference. .
The current actual guarantee amount is 192 million yuan. After the financing expired, Tongjitang Technology failed to return it as scheduled, and the company was listed as a defendant.
In January 2018, Tongjitang Holdings and Shenwan Hongyuan established an industrial fund. Shenwan Hongyuan invested 1 billion yuan as a priority LP, Junchuang Asset invested 495 million yuan as a mezzanine, and Tongjitang Holdings invested 100 million yuan. as general partner. The above funds were used for the Hefei Cancer Project worth 100 million yuan, which is still under construction.
As one of the fund GPs, Tongjitang Holdings is the bottom line. The listed company, Tongjitang Holdings and Shenwan Hongyuan signed a balance replenishment agreement and a share acquisition agreement.
In April 2020, Shenwan Hongyuan filed a lawsuit against Tongjitang Holdings and the listed company for failing to obtain fixed income from the fund as scheduled.
It is understood that the cancer hospital is jointly invested and constructed by Xinyu Junkai and the Hefei Institute of Physical Sciences, Chinese Academy of Sciences. Tongjitang Holdings indirectly holds 70% of the shares through Xinyu Junkai. It is planned to invest 1.5 billion yuan and open 1,500 beds.
More than a month before the illegal guarantee incident, the company had just discovered in its annual audit that Tongjitang Holdings and its related parties, through suppliers and other unrelated parties, had occupied up to 1.047 billion yuan of company funds.
Tongjitang Holdings promises to repay the principal and interest of the listed company’s funds in three installments before 2022.
Financial anomalies have been repeatedly questioned
Financial anomalies continue to accumulate and eventually explode, and the media has repeatedly warned earlier.
At the end of June, in the 2019 annual report disclosed by Tongjitang, the accounting firm issued an audit report that was “unable to express an opinion.”
The accounting firm stated that the internal controls of Tongjitang and its subsidiaries such as Tongjitang Pharmaceutical failed, and there were major deficiencies in capital activities, procurement, and sales. Through accounts payable, other receivables, other accounts payable and other accounts, a large number of financial transactions occurred with Wuhan Riyuexin, Tuanfeng County Xinwang Pharmaceutical and other companies.
According to media reports, Tongjitang’s revenue from food and health products in 2018 was only 128 million yuan, and at the end of that year, the company made an advance payment of 170 million yuan to its supplier Wuhan Riyuexin.
What kind of company is Wuhan Riyuexin? Qixinbao shows that the company was invested and established by two natural persons, Zheng Yuzhu and Zhou Zhihui, with a registered capital of only 500,000 yuan, and the number of public social security payers is only 2. Previously, Tongjitang also paid RMB 39 million for merger intention to Hubei Riyuexin Health, another company invested by Zheng Yuzhu. Also paying the intention payment for mergers and acquisitions were Jingmen Boxuan Pharmaceutical with 22 million yuan and Tuanfeng County Xinwang Pharmaceutical with 127 million yuan.
In addition to funding issues, the media has questioned the authenticity of Tongjitang’s financial reports.
In 2012, the company’s largest supplier was Zhendong Pharmaceutical Logistics Company, a subsidiary company of A-share listed company Zhendong Pharmaceutical, with a purchase amount of 274 million yuan (excluding tax). However, the transaction volume of Zhendong Pharmaceutical’s largest customer that year was 54.63 million yuan, and the top five customers contributed a total revenue of 180 million yuan. In other words, Tongjitang is not among Zhendong Pharmaceutical’s major customers at all.
In 2015, Hops acquired Tongjitang for a consideration of 6.1 billion yuan, and Tongjitang achieved a backdoor listing. During the performance betting period from 2016 to 2018, the company stepped on the line and fulfilled its performance commitments. In 2019, the company's performance suddenly plummeted 77%, making the outside world suspicious.
In 2019, the company vigorously promoted the acquisition of 60% equity of Belcom Pharmaceuticals for 270 million yuan. Once the acquisition is completed, close relatives of one of the actual controllers, Li Qing, will earn 60 million yuan within two years. Under widespread doubts from the outside world, the acquisition proposal failed to pass the shareholders' meeting.
In April this year, the company was investigated by the China Securities Regulatory Commission for allegedly violating laws and regulations in its disclosure of information.
In early July, the Shanghai Stock Exchange issued a letter of inquiry, requiring the company to disclose in detail its internal controls and abnormal financial conditions. The company has not responded to the letter of inquiry after several extensions.