Dongguang Microelectronics: Left hand low price reform right hand high price bet

Core TIP: The former state director Shen Jianping by the Dongguang microelectronics listed, is expected to make its wealth appreciation 15 times times, and by virtue of the signing of the betting agreement on the ratio of the fund yield is also considerable.　　Cao Yong Sujiang Shanghai, September 27 before the National Day holiday, from Yixing, Jiangsu Province, the Dongguang Microelectronics Co., Ltd. (hereinafter called "Dongguang Microelectronics") landed in the first board of the medium-sized and micro-plates to apply smoothly. According to the plan, Dongguang microelectronics plans to issue about 27 million shares in Shenzhen, the total share capital will reach 107 million shares.　　In accordance with the company's 2009 net profit of 23.1614 million yuan after the annual earnings per share of about 0.216 yuan, corresponding to the current SME board 50 times times the average issue price-earnings ratio, the company price of about 10.8 yuan.　　This means that both the Shen Jianping, who became the actual controller of the company in 2000, and the Chinese-Belgian direct-investment Fund (hereinafter "the Fund"), which was signed in 2006, are expected to exceed 200 million yuan in book value. The difference is that the former Dongguang microelectronics big shareholder state-owned Yixing Silk Factory director of the Shen Jianping has 4 investment costs less than 200 million yuan, now with the help of the Dongguang microelectronics listed SME board is expected to make the wealth appreciation 15 times times, and by virtue of the signing of the betting agreement in the middle of the fund despite high cost　　But the 40 million-dollar investment will be lifted in one year after the company's listing, and the 5-year 5 times-fold yield is still considerable. The state director ranks among the billionaires according to the revelation of the prospectus disclosed by the Dongguang Microelectronics, the predecessor of the Dongguang Microelectronics Co., Ltd. (hereinafter referred to as "Yixing East") was established in August 31, 1998, the state-owned Yixing Silk factory, with its housing buildings and machinery and equipment, and other physical assets, after the evaluation　　, 2.3438 million yuan of 2.03 million yuan for the east of Yixing capital investment, higher than part of the 313,800 Yuan as yixing east to Yixing silk factory liabilities; the remaining 230,000 yuan in the registered capital 2.26 million yuan are jointly funded by Li Guohua, Lin Shi and Zhao Yongliang 3 natural persons respectively.　　Prior to this October 1996, the state-owned Yixing Silk Factory has been reformed, the nature of its enterprises from the full name of ownership into a joint-stock system, Shen Jianping continue to serve as a legal representative of the company.　　According to the disclosure, Yixing East in 1998 was established in the year did not form sales, in product development and market development phase of 1999 years only to achieve 709,000 yuan sales revenue, the loss of 1.0164 million yuan.　　At the beginning of 2000, the business still did not achieve rapid expansion of the Yixing east continued to lose money, and as a controlling shareholder of the Yixing Silk factory also loss of serious losses, so decided to and silk main industry independent semiconductor subsidiary of Yixing east of the equity transfer. However, the east of Yixing executives do not seem to care about the company's short-term losses, the company's chairman and general manager Shen Jianping together Lin Shi, such as 3 deputy and 3 of the natural person without any relationship with the price of the contribution of the Yixing silk factory held a stake in 2.03 million yuan. Which contributed 800,000Shen Jianping, who won the 35.4% stake in Yixing East, became the largest shareholder in the company.　　According to the evaluation report from Yixing Founder's accounting firm, the audit value of the total assets and net assets of Yixing East as at March 25, 2000 was 6.0493 million Yuan and 746,400 yuan respectively, but the prospectus showed that the value of net assets was only 1.6422 million yuan.　　Although Yixing East management has spent real money to obtain the insolvency of the company's control, but after 10 years of development, as of the end of June this year, the owner's equity has been as much as 256 million yuan, the company's last three years to achieve a net profit of more than 70 million yuan.　　From the information disclosed by the Dongguang Microelectronics, Shen Jianping, formerly the director of the state-owned Yixing Silk factory, became the Director and party secretary of Yixing silk factory in April 2000 after becoming a controlling shareholder in Yixing East. In addition, in addition to 4 of the operating layer, the investment of 500,000 yuan in Yixing east of the 22.12% stake in the Jianwenlu is the Agricultural Bank of Jiangsu Province, Science and technology Department cadres　　Today, it has 6.7973 million shares of Dongguang Microelectronics, once the company is successfully listed, the market value of this part of the stake will be worth about 73.41 million yuan, which does not include its two shares in 2003 and 2007 have been respectively set up by 125,000 yuan and 3.6 million yuan. February 2003, as a major shareholder of the company Shen Jianping began to continue to focus on equity, its $2.1 per 1 yuan in the price from Jianwenlu, Lin Shi, Xu Zhixiang, Chen Junpeo and Li Guohua hands were 50,000 yuan, 25,000 yuan, 30,000 yuan, 30,000 yuan and 50,000 Yuan capital,　　After the transfer was completed, Shen Jianping's shareholding increased from 35.4% to 43.58%.　　In the following March 2003, Yixing East started the shareholding system transformation, the company changed to Dongguang Microelectronics after the total share capital of 22,675,311 shares.　　However, in the overall restructuring of the personal income tax has not been paid, until this year the company launched the listing plan before the replenishment, but involved in specific data and payment steps and the Dongguang microelectronics prospectus is not mentioned in the report. In addition, it is noteworthy that, according to the time of the Shanghai Bandung Public accounting firm (now renamed as State Fu Haohua) audit data, as at February 28, 2003,　　The net assets of the east of Yixing are about 22.6753 million yuan; This means that the enterprise, which is insolvent on March 25, 2000, has been taken over by the operating layer for less than 3 years and the net assets have reached 22.6753 million yuan. Now, after 2006 years of increased capital of 10 million yuan and 2007 capital contribution of 8.6 million yuan,　　Shen Jianping has been the total possession of the Dongguang microelectronics 27,760,070 shares to 10.8 yuan to calculate the price, the company once a smooth listing, Shen Jianping individual shareholding market value will reach about 300 million yuan, which compared to the four times before and after the cost of about 19.8725 million yuan to appreciate about 15 times times more. With the Sino-fund on the bet for the Dongguang microelectronics, the end of 2005 launchedHas undoubtedly become a crucial step in its 10-year development process.　　In order to further expand the company's market share and the purchase of new equipment, the company decided to increase the shareholder and the major shareholder Shen Jianping increase in the same time to introduce institutional investors in the Fund, and will raise the 80 million yuan to buy a special Vdmos (vertical double diffusion type field effect tube) production line. According to the plan, first Dongguang microelectronics shareholders in accordance with the proportion of original shareholders will be 20 million yuan of unallocated profit to increase the share capital 20 million shares; At the same time, the company's controlling shareholder Shen Jianping and the Sino-fund respectively contributed 10 million yuan and 40 million yuan to participate in the company to increase capital,　　The increase in the price of about 1.96 yuan per share, compared to the increase in equity assets of 1.77 yuan per share premium of about 10%.　　After the completion of the increase, the company's actual control of Shen Jianping's shareholding was diluted to 34.76%, the 20,408,163 shares of the new shares of the fund to 29.93% of the shareholding to become the company's second largest shareholder, the remaining 6 natural persons total holding the remaining 35.31% of the shares. However, in this round of increase in capital, the new shareholders in the fund and other shareholders signed a gambling agreement.　　According to the disclosure, the capital fund of 40 million yuan after the completion of the capital increase will enjoy the following rights.　　First of all, if the Dongguang microelectronics within 5 years because the business does not meet the listing requirements or only for policy reasons not listed on the Shanghai and Shenzhen two major exchanges, then the fund will have to require other shareholders or companies to redeem their holdings in cash, the redemption price at the time of the company's net assets. Secondly, if the Dongguang microelectronics appears for two consecutive years of net asset yield (excluding non-recurrent profit and loss) below 10%, the fund will have the right to require the original shareholders or companies to redeem their shares in cash form, but the redemption price is the original 40 million yuan on the basis of the cost of investment plus 20% of the annual income (　　, from the financial data disclosed by the company, its 2008 net assets yield was 9.51% below 10%, but the net assets yield of 2009 years increased to 10.09%. Third, if the Dongguang microelectronics need additional shares to introduce new investors, it is necessary to meet the new shareholder subscription price is not less than 1.96 yuan per share, the new shareholder intervention shall not make the controlling shareholder Shen Jianping lose control, and the ratio of equity in the fund should not be less than 25% ; Judging from the last round of capital increase before the company's launch in April 2007,　　The new shareholder Dinda 25.0467 million yuan to obtain 11.8145 million shares of new shares, the increase in prices per share of 2.12 yuan is significantly higher than the Fund's investment price of 1.96 yuan, after the completion of the Fund's shareholding ratio diluted to 25.51%, just above its set limit of 25%. In addition, in accordance with the capital increase agreement, Dongguang Microelectronics General Meeting Authority has also made adjustments, that is, the general meeting of shareholders by special resolution, should be held by shareholders of the shareholders of the voting rights of more than three-fourths through, rather than fixed two-thirds percentage of the company law; This is clearly for the stockDilution of the right after no less than 25% of the fund deliberately set.　　Now, in China than the fund has not reached 5 years, the Dongguang Microelectronics launched the listing tour, as the SFC in the sponsor training meeting repeating require the company to be listed before the existence of the gambling agreement, especially for the cause of equity or operating instability of the gambling agreement before the meeting must be terminated.　　Thus, the Dongguang microelectronics in the March 22 this year, the above additional parties to enter into an additional agreement to increase capital Agreement, the provisions of the Fund's redemption agreement will be declared null and void; July 8, the above parties again signed a supplementary agreement bis, the increase in the agreement on the third article of the anti dilution clause. However, some brokerage bankers also disclosed to reporters that generally speaking, the enterprise terminates the gambling agreement does not mean that no longer fulfills, often before the company has not been listed to adopt one kind of alternative solution, but because these are limited to start the listing procedure in the legal document no longer manifests, both sides often dare not sign other supplementary agreement,　　Therefore the actual fulfillment process is a test to both sides good faith. Up to the listing, the fund relies on 40 million yuan to obtain the Dongguang microelectronics 20,408,163 shares, the price of 10.8 yuan to calculate its market value of about 220 million yuan, less than 5 years of time asset appreciation about 5.5 times times.