Photo source: Visual China

Blue Whale financial reporter Xu Xiaochun

On the second day after the “AIGC Concept”, the stock price of Leo shares surged. Chairman Wang Xiangrong's mother traded her own shares in a short period of time, and a case has now been opened for investigation. Wang Xiangrong denies leaking any business-related information to her mother. Is this all just a coincidence?

As an old player in the capital market, Leo shares itself are also very fond of “stock trading”. Once betting on Ideal Auto's Leo shares, after Ideal Auto's profits and losses were basically “tied” to fluctuations in Ideal Auto's stock price. In July of last year, Leo shares proposed a plan to invest no more than 3 billion yuan in securities.

The day after getting on with the “AIGC Concept”, the chairman's mom bought it

On April 17, Wang Xiangrong, chairman of Leo Co., Ltd., and Wang Zhuangli, vice chairman, simultaneously received the “Notice of Case Filing” issued by the Securities Regulatory Commission. The two were filed by the Securities Regulatory Commission on suspicion of short-term trading of “Leo Shares” shares. According to the announcement, the investigation actually involved Wang Xiangrong and Wang Zhuangli's mother Yan Suyun trading company shares.

As of September 30, 2023, Wang Xiangrong directly held 9.42% of Liou's shares. He is the controlling shareholder and actual controller of the company, while his brother Wang Zhuangli directly holds 7.45% of the listed company's shares.

In 2022, an artificial intelligence outlet represented by ChatGPT became apparent, and Leo shares also took the opportunity to launch the “AIGC concept.” During the year, the company quickly formed a team, built an AI platform on the Group's intranet, and began investing in the development of a new generation of AIGC products called “Whimsical Ideas”. In 2022, Leo's R&D expenses were about 196 million yuan, an increase of 18.76% over the previous year, but judging from major R&D projects, there are no AIGC-related product projects yet.

Coincidentally, the day before Yan Suyun first bought Leo shares, Leo shares had just been investigated by the agency on March 21. Zheng Xiaodong, president of the company, and Zhou Liming, director and deputy general manager, received the reception. During this period, Leo Co., Ltd. focused on explaining the AI business, including the company's layout at AIGC. Leo shares surged the next day, reaching an intraday high of 9.24%.

On March 22 and 24, 2023, Yan Suyun bought Leo shares in 4 installments, with a total transaction amount of about 1,237,200 yuan. On May 30, Yan Suyun sold all of the above shares for a total transaction amount of about 1,113,700 yuan. Yan Suyun's above behavior constituted a short-term transaction, which resulted in a loss of 123,500 yuan.

The support of the AI concept did not push up the stock price for a long time. The cumulative decline in Leo stock price during Yan Suyun's short-term trading period was 7.23%. On June 10, 2023, Wang Xiangrong and Wang Zhuangli publicly apologized for Yan Suyun's short-term trading behavior. The two said they were unaware of their actions and did not surrender related profits due to transaction losses. In their apology, Wang Xiangrong said that they did not disclose information related to the company's operations to Yan Suyun, and that the relevant transactions were only their own independent investment acts based on the judgment of the secondary market.

Even so, in August, Wang Xiangrong and the two received a “warning letter” from the Zhejiang Regulatory Bureau of the Securities Regulatory Commission. A year later, the Securities Regulatory Commission opened another investigation against Wang Xiangrong and the two.

Currently, Leo's business is mainly divided into two major sectors: manufacturing and the Internet. In the first half of 2023, the Internet business accounted for about 83.36% and was the company's main source of revenue, which mainly included media agency business and digital marketing business. In the early days, Leo Co., Ltd. was mainly in the manufacturing industry, and its products included industrial pumps. Currently, the gross margin of Leo's manufacturing industry is about 23.63%. However, the gross margin of the Internet business of Leo shares, which is the main component of revenue, is only 3.83%, of which the gross margin of the media agency business, which contributes more than 80% of revenue, is only 3.2%. At the time of disclosure of the 2022 annual report, Leo's AIGC products were still in the development and testing stage, and were only tested by some customers.

Listed companies also love to trade stocks, and their performance “bets” on ideal cars

The performance of Leo shares in recent years is also almost deeply tied to “stock trading” earnings.

In 2016, Beijing Chehejia Information Technology Co., Ltd. (hereinafter referred to as “Che Hejia”), the predecessor of Ideal Auto, carried out Series A financing. At the time, the valuation was about 3 billion yuan. Leo shares were one of the investors and participated with 350 million yuan of its own capital. The following year, the R&D and production of Ideal Auto's SUV was imminent. The company carried out an A3 round of financing, and Leo shares once again invested 100 million yuan to increase the amount. Many years later, this investment of 450 million yuan leveraged Leo Shares' profit growth tens of times.

In 2019, Car and Family controlled its domestic interests through an offshore company in the Cayman Islands. After the relevant rights were changed, Leo shares held the original shares of Ideal Auto through its wholly-owned subsidiary Leo Hong Kong, and Ideal Auto landed on NASDAQ in July 2020.

Until 2020, Leo's performance continued to decline, and the company's net profit declined continuously. Even if losses were reversed in 2019, the company's annual net profit was only 308 million yuan. Meanwhile, the listing of Ideal Auto has greatly increased the fair value of the shares held by Leo Shares. In 2020, the net profit of Leo shares increased to 4.772 billion yuan due to confirmation of fair value change income of 4.5 billion yuan of investment in ideal automobiles, but after deducting related non-recurring profit and loss, the net profit of Leo shares was only 283 million yuan.

In other words, Leo's own profitability has not substantially improved; the improved performance is only due to investment in ideal cars. Over the next three years, confirmation of the return on investment in Ideal Auto had a significant impact on Leo's profits. In 2021 and 2022, Ideal Auto's stock price fell 10.81% and 42.44%, respectively.

Leo Co., Ltd. confirmed an investment loss of 7.12 million yuan in 2021 due to the disposal of some Ideal Auto shares. At the same time, the fair value change income confirmed by investing in Ideal Auto and Xinfeng was about 592 million yuan, far lower than in 2020. In the same year, Leo shares confirmed bad debt losses to a customer, etc., which combined caused the company to lose more than 1 billion yuan in net profit for the whole year.

In 2022, Leo shares confirmed that the fair value change loss was only 1.3 billion yuan, mainly due to the decline in Ideal Auto's stock price. Looking at the full year, the total confirmed loss amount of Ideal Auto shares held by Leo Co., Ltd. and some Ideal Auto shares sold was about 729 million yuan, which was the main reason for the company's continued loss in net profit.

In the third quarter of 2023, Leo's revenue fell 16.35% year on year. As a result, the overall revenue scale for January-September increased by only 3.48% over the same period last year, but at the same time, the company's net profit to mother reached 2.06 billion yuan, an increase of 29 times over the previous year. Judging by the detailed blame, it is still due to fluctuations in Ideal Auto's stock price. From January to September of last year, Ideal Auto's stock price increased by a cumulative total of 62.05%. As a result, Leo shares confirmed that the fair value change revenue reached 1,726 billion yuan.

At the end of September 2023, Leo shares still had transactional financial assets of 1,665 billion yuan on their books. In addition to Ideal Auto, Leo shares were also the top five shareholders of Zhejiang Danong and Xinfengguang. Bicheng E-commerce, in which the company is a shareholder, has already initiated GEM listing guidance, and Haoju Haoju is preparing for the A-share listing.

In July of last year, “not doing business properly” Leo shares proposed another plan to invest in securities with no more than 3 billion yuan of idle capital.