Easy Jane Finance and Economics

On August 30th, the CSRC reported that this year, a company had been transferred for inspection because of the particularly serious problems involved in IPO verification, which was called "the first case of IPO financial fraud in 2019".

Verified by a number of media, the enterprise may be recommended for CITIC Jieli Technology.

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Caught up in the storm of "the first case of financial fraud of IPO in 2019"

According to the CSRC, the company is suspected of having problems such as not recording a large amount of external income and external costs, and transferring funds to the actual controller and his relatives, executives and core employees through external payment bank accounts.

In this regard, some investment bankers believe that the nature of the CSRC is so serious that it can basically be concluded as financial fraud.

Verified by a number of media, the enterprise may be Zhuhai Jieli Technology Co., Ltd., and the sponsor is CITIC Construction Investment.

According to the financial verification cases of the IPO project in previous years, if the proposed IPO enterprise is transferred for inspection and found to be financial fraud, the corresponding sponsor institution will also be put on file for investigation and may be severely punished.

In 2016, Xinda Securities was severely punished for the IPO fraud case in Zhenlong, Liaoning Province, confiscating business income of 1.6 million yuan and fined 3.2 million yuan. Two sponsors, Xunyuan and Li Wentao, were warned and fined 300000 yuan respectively, and banned from the securities market for five years.

Some investment bankers pointed out that once the case is put on file for investigation, the investment banking business of securities firms will be directly affected, and other sponsor projects will also be affected. Because according to the relevant regulations of the CSRC, once a securities firm is placed on file for investigation, the CSRC will not accept any project materials recommended by the securities firm as a sponsor agency, nor will it accept any project recommended by the relevant sponsor representative for the time being, and the projects recommended by its sponsor will also be suspended.

Therefore, once the regulatory decision to investigate Jerry Technology and CITIC Construction Investment, it will be a huge potential crisis. Investment bankers also pointed out that because Citic Construction Capital has made rapid efforts in investment banking in recent years, it is initially estimated that, together with some potential companies that are about to declare IPO, more than 100 projects will be affected.

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The rapid development of the first brother of the investment bank

Citic Construction Investment Co., Ltd. plays a prominent role in the investment banking industry.

In the early years, it became a hit in the industry because of the legend of high bonus.

First, it won the title of "75 division" because it wrote directly on offer, "the company will provide you with a competitive salary in the market, and the overall level is above the 75 quartile of the market level". Later, because it paid a bonus of 103 months in 2015, claiming an average year-end bonus of 5 million, more than 99% of its peers advanced to "99 company".

In recent years, its investment banking business has been on the rise. In 2018, CITIC invested in A-shares, becoming the 11th A + H-share brokerage; in the first half of this year, it became the first in the industry with net income of 1.58 billion yuan in investment banking, slightly surpassing CITIC.

According to the China News, the number of lead underwriters of equity financing of CITIC Construction Investment ranks first in the industry, and the amount of main underwriting ranks fourth in the industry; the number of principal underwriters of bonds ranks second in the industry, among which the number of principal underwriters and the amount of main underwriting of corporate bonds rank first in the industry. Especially in Science and Technology Innovation Board, which has a high underwriting recommendation rate, CITIC Construction has recommended 5.5 underwriting sponsors among the first 25 listed companies, ranking first in the industry.

Originally thought that CITIC Construction Investment would take advantage of this wave of dividends on the Kechuang board to rise to the next step, but unexpectedly, the disadvantages brought about by high-speed progress are turning into a wave of danger approaching.

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Two Science and Technology Innovation Board projects failed in one day.

On August 30th, the Securities Regulatory Commission announced that the Science and Technology Innovation Board project recommended by CITIC Construction became the eighth enterprise in Science and Technology Innovation Board to terminate the audit.

On the same day, Heng an Jiaxin, a Science and Technology Innovation Board project recommended by CITIC Construction, failed to become the first company under the registration system not allowed to be registered and listed by the CSRC.

As for the reasons for not registering, the CSRC also made it very clear. To put it simply, Hengan Jiaxin only signed the contract on December 28 / 29, 2018, and the four contracts that had not been invoiced or recovered by the end of 2018 were recognized as 2018 income. Under the inquiry of the examiners, the enterprise washed back the relevant income. The revenue was reduced by nearly 137 million yuan and the profit was reduced by 78.27 million yuan, resulting in the loss of 90% of the profits.

According to Science and Technology Innovation Board documents, after the declaration of the initial materials, except for special accounting judgments, the cumulative net profit affected by the correction of accounting errors will reach more than 20% of the net profit of the current year, it should be regarded as that the issuer does not meet the issuing conditions in terms of accounting basic work norms and relevant internal controls, so Hengan Jiaxin was rejected.

Citic Construction Investment as the head of the securities firm, there are actually two Science and Technology Innovation Board projects failed in one day, which is also surprising. Some investment bankers said that intermediaries are suspected of "releasing water" and "should be holding the mentality of breaking through customs."

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Does it only emphasize quantity rather than quality?

In addition, another Science and Technology Innovation Board project recommended by CITIC Construction, which was submitted for registration on June 29th, also has the problem of making a large profit reduction after declaration.

It is understood that Century Space operates as a satellite system, and the satellite system is accounted for as fixed assets when it is declared.

However, the auditors believe that Century Space does not have ownership of the satellite, allowing it to provide sufficient evidence for the accounting of fixed assets. As a result, Century Space classified this part of the "fixed assets" as "intangible assets", originally amortized according to 10 years of depreciation, but changed to amortized according to the lease term of 7 years, resulting in a substantial increase in amortization expenses. After adjustment, Century Space's overall net profit fell by more than 50 per cent in 2016-2018.

Today, more than two months have passed since the date of submission of registration, and there are no results yet, and it is hard to say how the space of the century will look forward. Most people are pessimistic about Hengan Jiaxin.

As the leading securities firm in the investment banking industry, Science and Technology Innovation Board sponsor projects have problems one after another, and the profits of two sponsor projects have been significantly reduced, which may cause the market to question whether it only emphasizes quantity rather than quality.

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The disadvantages appear under the mode of rapid development of business.

In just a few years, Citic Construction Investment has surpassed CICC and CITIC to take the top spot, and its speed of development has really taken the industry by surprise.

However, the drawbacks of the rapid business development model also began to appear, the decline in the quality of sponsors, investment banking project accidents, people have to question its risk control system, whether there is serious due diligence, to fulfill the responsibility of the "gatekeeper" of the capital market?

You know, a big mistake can be fatal for investment banks.

Once, Southwest Securities was put on file for investigation because it involved several sponsor companies, the investment banking project was carpeted by competitors, and the investment banking business plummeted, but now it has not recovered. Ping an Securities also fell from the peak and a large number of backbones were taken away from the top because of the financial fraud incidents of Sheng Jingshan River, Wanfu Sheng Ke and Hailianxun.

Therefore, how to maintain the high quality of the project under the rapidly developing business model will be a problem that CITIC Construction Investment needs to ponder.