Image credit: Visual China

On December 17, Blue Whale News reported (by journalist Wang Xiaonan) that there has been new progress in the landing of control rights, as the "first stock of toys" Guangdong Qunxing Toys Joint-stock (002575.SZ) has once again seen a management buyout.

After a proposed private placement in 2023 and no developments in planning for a change of actual controller for over a year, Guangdong Qunxing Toys Joint-stock has restarted the management buyout. This issuance price is approximately 9.4% lower than last planned private placement, and the issuance target remains the Tibet-based BoXin controlled by Chairman Zhang JinCheng. Once the issuance is completed, Guangdong Qunxing Toys Joint-stock will no longer be in a state of being ownerless.

Known as the "first stock of toys", Guangdong Qunxing Toys Joint-stock experienced a decline in performance after going public, and the company has been seeking transformation but has repeatedly failed. After the "Big Data Madman" Wang SanShou took over, the non-operational funds of Guangdong Qunxing Toys Joint-stock were utilized, leading the listed company into a dilemma of unstable control rights. In 2024, Zhang JinCheng led Guangdong Qunxing Toys Joint-stock to venture into the computing power sector, but with new business yet to take shape and a decline in gross margin for key business in liquor sales, Guangdong Qunxing Toys Joint-stock still reported a loss of millions in the first three quarters.

The new private placement welcomes Chairman Zhang JinCheng to take control, with the floating profit exceeding 0.3 billion yuan.

On December 16, the Board of Directors of Guangdong Qunxing Toys Joint-stock issued a report to all shareholders regarding the management buyout, stating that Tibet BoXin intends to subscribe for the stocks issued to specific targets in cash, with a subscription quantity of no less than 0.105 billion shares and no more than 0.178 billion shares, raising total funds of no less than 0.418 billion yuan and no more than 0.71 billion yuan.

After this issuance is completed, Tibet BoXin will become the controlling shareholder of Guangdong Qunxing Toys Joint-stock, and Chairman Zhang JinCheng will become the actual controller of the company, constituting a management buyout. This is also Zhang JinCheng's second attempt to gain control of Guangdong Qunxing Toys Joint-stock through subscription for a private placement after more than a year.

In July 2023, Guangdong Qunxing Toys Joint-stock announced a plan to conduct a Private Placement to Peking BoXin controlled by Chairman Zhang Jincheng, which will change the company's controlling shareholder to Peking BoXin, and the actual controller will change to Zhang Jincheng, with an issue price of 4.25 yuan per share, with the number of shares issued not less than 0.141 billion shares and not exceeding 0.174 billion shares.

Since the announcement of the above Private Placement, there has been no new progress. Until July 9 of this year, the original actual controller Wang Sanshou completed the transfer of 66.66% equity held by Guangdong Qunxing Toys' shareholder Shenzhen Xinghe through judicial auction, reducing the voting rights that he could control in the listed company to 0.45%, and the largest shareholder of Shenzhen Xinghe also changed from Wang Sanshou to financial investor Li Yue. Thus, Guangdong Qunxing Toys changed to a state without a controlling shareholder or actual controller.

On the evening of October 14 this year, Guangdong Qunxing Toys announced that due to changes in the company's controlling shareholder and actual controller, as well as other practical circumstances, the background, purpose, and basis for issuing A-shares to specific objects in 2023 had changed, and the company decided to terminate the issuance of A-shares to specific entities for the year 2023.

On the same day, to resolve the control dilemma, Guangdong Qunxing Toys threw out a proposal for a Private Placement of A-shares to specific objects for 2024, the issuance object is still Peking BoXin, but the issue price is 3.99 yuan per share, which discounts the previous planned Private Placement issue price by about 9.4%.

Currently, Peking BoXin does not hold shares in Guangdong Qunxing Toys, and Zhang Jincheng directly holds 2.66% of the shares; in addition, as of October 10, he also indirectly holds 0.0025% of the shares of Guangdong Qunxing Toys through Peking Jiulianhuan. After the issuance is completed, Peking BoXin will hold 14.04%-21.69% of the equity, becoming the controlling shareholder of Guangdong Qunxing Toys, while the proportion of voting rights directly and indirectly controlled by the actual controller Zhang Jincheng will be 16.33%-23.77%.

Zhang Jincheng, who rose to fame in the Capital Markets through ST Hongsheng, had actually set his sights on the troubled Guangdong Qunxing Toys four years ago.

According to the announcement, Zhang Jincheng was born in 1979, obtained his master's degree from Suzhou University in 2006, and later obtained his doctoral degree from Suzhou University in 2014. Zhang Jincheng has served as a supervisor and chairman of the supervisory board of Zhongyin Co., Ltd., and vice president of Tibet Zhongyin Group Co., Ltd. In 2017, Wingtech Technology achieved listing by shelling Zhongyin Co., Ltd.

Since February 2020, Zhang Jincheng has been employed by Guangdong Qunxing Toys, and since August of the same year, he has served as the company's director. At that time, Zhang Jincheng was a shareholder of Beijing Jiulianhuan, who is an acting party of the company's controlling shareholder, and he indirectly held 19.8099 million shares of the company through Beijing Jiulianhuan, accounting for 3.2018% of the company's total equity.

In December 2020, Guangdong Qunxing Toys Joint-stock appointed Zhang Jincheng as the company's Chairman and General Manager (President), and he also took on the role of Secretary of the Board of Directors. In April 2021, Guangdong Qunxing Toys announced that Chairman Zhang Jincheng would return 0.21 billion yuan of the remaining non-operating funds and corresponding interest owed by the original actual controller Wang Sanshou.

After disclosing the change in actual control, on October 15, Guangdong Qunxing Toys' stock price reached its limit, and continued to rise, reaching 9 yuan per share on December 10, a new high in recent years. On December 17, Guangdong Qunxing Toys closed at 7.24 yuan per share, which indicates that Zhang Jincheng had an unrealized gain of between 0.341 billion yuan and 0.578 billion yuan.

Seeking to transform and cross into computing power, the company still incurred a loss of tens of millions in the first three quarters.

According to data, Guangdong Qunxing Toys, founded in 1996, originally focused on the research and design, production, and sale of electronic and electric toys, and it was listed on the Shenzhen Stock Exchange in April 2011.

From the year it went public, Guangdong Qunxing Toys' net income attributable to shareholders began to decline. By 2014, both the company's revenue and net income growth rates had dropped. In 2017, Guangdong Qunxing Toys reported its first loss of 21.4128 million yuan. At that time, the company's founders Lin Weizhang and Huang Shiqun considered exiting.

In November 2018, Guangdong Qunxing Toys welcomed a buyer. At that time, the controlling shareholder, Qunxing Investment, planned to transfer 20% of its stake in Guangdong Qunxing Toys to companies controlled by Wang Sanshou, including Shenzhen Xinghe, Chengdu Xinghe, and Beijing Jiulianhuan, for a price of 0.7 billion yuan. Meanwhile, Qunxing Investment signed a shareholder voting rights entrustment agreement with Chengdu Xinghe.

Wang Sanshou, born in the '80s, was known to the public for his title as 'Big Data Fanatic.' In 2010, he founded Jiucifang Big Data Information Group Co., Ltd.; subsequently, in 2014, he cooperated with the Guiyang government to create the 'Guiyang Big Data Exchange' and served as its president.

However, Wang Sanshou's arrival did not significantly change the performance of Guangdong Qunxing Toys; rather, it brought turbulence and turmoil to the company. Apart from being mired in difficulties due to debt issues, Wang Sanshou had also been listed as a dishonest person by multiple courts, and he occupied non-operating funds of Guangdong Qunxing Toys by leading the company's external investments, asset acquisitions, and large advance payment transactions.

From March 2019 to April 2020, a total of 0.327 billion yuan was transferred to the accounts of related parties of the actual controller Wang Sanshou, accounting for 45.42% of the net assets of Guangdong Qunxing Toys Joint-stock at the end of 2019. After discovering the issue of the actual controller's fund occupation during self-examination, the stocks of Guangdong Qunxing Toys Joint-stock were subjected to other risk warnings, and the company and related responsible persons received a regulatory warning letter from the Guangdong Securities Regulatory Bureau and were publicly condemned by the Shenzhen Stock Exchange.

On June 2 this year, Guangdong Qunxing Toys Joint-stock issued two announcements stating that the actual controller Wang Sanshou was cooperating with the Beijing public security organs in the investigation. In the notice published on August 14 regarding the judicial auction of the original actual controller Wang Sanshou’s equity transfer, Guangdong Qunxing Toys Joint-stock stated that they are currently unable to contact Wang Sanshou himself and his concerted actors, nor can they obtain information about his residence or communication address.

On November 11, Guangdong Qunxing Toys Joint-stock announced that its shareholder Beijing Jiulianhuan was forced to dispose of 0.016 million shares due to a loan contract dispute, and after the execution was completed, his shareholding ratio would decrease from 0.0025% to 0%.

As one of the largest independent brand electronic toy companies in China, known as the 'first stock of toys', Guangdong Qunxing Toys Joint-stock has repeatedly sought transformation and restructuring since 2014, attempting to enter several popular sectors such as mobile games, energy, and military industry, but has been unsuccessful.

Although the listed company's name still contains the word 'toys', currently, Guangdong Qunxing Toys Joint-stock's main business includes alcoholic beverage sales, self-owned property leasing, and property management services, and the original toy main business has long been divested. In the first half of 2024, the revenue from alcoholic beverage sales was 0.111 billion yuan, accounting for 87.78% of the total revenue, which is the main source of income for Guangdong Qunxing Toys Joint-stock, but its gross margin was only 1.25%, a decline of 6.63% compared to the same period last year.

Under the leadership of Zhang Jincheng, on January 19 this year, Guangdong Qunxing Toys Joint-stock announced its entry into the computing power industry, signing a 'Computing Power Service Contract' with CHINA MOBILE Zhejiang Co., Ltd., to procure computing power services from the latter, with a fixed price (including tax) portion of 0.276 billion yuan. This operation also triggered a prompt attention letter from the Shenzhen Stock Exchange to Guangdong Qunxing Toys Joint-stock.

It is worth noting that Zhang Jincheng is also the Executive Director and General Manager of Hangzhou Turing, a wholly-owned subsidiary of Guangdong Qunxing Toys Joint-stock that is involved in smart computing power rental services. This company was established on January 8, 2024. In the first half of this year, Hangzhou Turing reported 0 yuan in operating income and a net loss of 5.9715 million yuan.

In a report addressed to all shareholders, Guangdong Qunxing Toys Joint-stock stated that the company has completed the construction of the resource pool for Turing project’s computing power integration services and is waiting for final acceptance, but currently this business is still in the preliminary startup phase.

The new business has not yet formed, the core business gross margin has declined, and Guangdong Qunxing Toys Joint-stock is still facing a control power dilemma, with its performance remaining sluggish in the first three quarters of this year. The company achieved revenue of 0.229 billion yuan, a year-on-year increase of 577.67%; the net income attributable to the parent company was a loss of 10.3147 million yuan, compared to a profit of 12.6966 million yuan in the same period last year.