①The case involving the suspected crime of insider trading by an entity has been transferred to the procuratorial organs for examination and prosecution; ②The company had planned to spin off its subsidiary for an IPO, but according to relevant regulatory provisions, if the company or its controlling shareholder or actual controller has been subject to administrative penalties within the past 36 months, the subsidiary cannot be spun off for listing. As such, the plan has not been realized at present.
The repercussions of an alleged insider trading penalty from five years ago are still being felt. The leading lithium mining company $GANFENGLITHIUM (01772.HK)$ announced today that on December 29, it received a referral for prosecution notice from the Yichun Public Security Bureau. Due to the suspected crime of insider trading as a corporate offense, the case has been transferred to the procuratorial authorities for review and prosecution.
To trace back the events, the alleged insider trading by Ganfeng Lithium primarily involved stock transactions of another company in the lithium battery industry chain, Jiangte Motor. In April 2020, Jiangte Motor was subjected to delisting risk warnings due to consecutive losses over two years. To mitigate the risks, local authorities facilitated discussions between Ganfeng Lithium and Jiangte Motor as a strategic investor in June of the same year. On August 12, both parties signed a Memorandum of Cooperation, under which Ganfeng Lithium intended to exclusively subscribe to the private placement shares and take control. The following day, Jiangte Motor announced the matter and suspended trading.
However, on August 20 of that year, the two parties terminated their planning due to disagreements over cooperation terms. It is important to note that this non-public offering may have led to a change in control of Jiangte Motor, constituting inside information, with the sensitive period lasting from June 9 to August 13, 2020. Ganfeng Lithium's Chairman Liangbin Li and Board Secretary Ming Ouyang were among the insiders privy to the confidential information.
During this time, under the decision-making arrangements of Liangbin Li, specifically overseen by Ming Ouyang, and with the actual operations carried out by employees in the securities department, the “Ganfeng Lithium” securities account traded “*ST Jiangte” stocks during the sensitive period of insider information. The final profit from these trades amounted to RMB 1.1053 million. The proceeds from the sale of the stocks remained in the “Ganfeng Lithium” securities account.
It was found that regarding Ganfeng Lithium’s illegal insider trading activities, the company’s chairman and then-president Liangbin Li was the directly responsible principal, while the then-board secretary Ming Ouyang was another directly responsible individual. The above-mentioned illegal facts are supported by evidence including relevant announcements from Jiangte Motor, relevant securities and bank account data, transaction records, exchange-calculated data, and transcripts of interviews with relevant individuals, sufficient to establish the case.
According to the Administrative Penalty Decision issued by the Jiangxi Securities Regulatory Bureau, due to suspected insider trading in the secondary market of a certain A-share listed company’s stock, the China Securities Regulatory Commission decided to investigate the company on January 24, 2022. The company’s illegal gains of RMB 1.1053 million were confiscated, and it was fined RMB 3.3159 million. Liangbin Li, then-president of Ganfeng Lithium, and Ming Ouyang, then-board secretary, were given warnings and collectively fined RMB 800,000.
In today’s announcement, the company stated that this matter follows the administrative penalty imposed by the Jiangxi Securities Regulatory Bureau and represents the subsequent normal judicial process conducted in accordance with the law. The company has fulfilled its information disclosure obligations in a timely manner as required, paid the fines as stipulated, and conducted thorough rectifications of related issues.
Notably, in November 2022, Ganfeng Lithium announced plans to spin off its controlling subsidiary, Jiangxi Ganfeng Lithium Battery Technology Co., Ltd. (hereinafter referred to as “Ganfeng Lithium Battery”), for an IPO and implement a capital increase and share expansion plan. According to the disclosures at that time, in addition to the company and Ganfeng Lithium Battery’s employee shareholding platform, multiple external investors were also introduced.
However, according to relevant regulatory provisions, if a company or its controlling shareholder or actual controller has been subject to administrative penalties within the past 36 months, it is prohibited from spinning off its subsidiary for listing. In March this year, Ganfeng Lithium Battery initiated a targeted capital reduction and share repurchase plan worth RMB 1.6 billion, which was seen by the market as a signal that its plans to spin off Ganfeng Lithium Battery for listing had encountered obstacles.
Editor/KOKO