Sanxie Electric's IPO Eve "Sudden Dividend," Controlling Shareholder Receives 12 Million, Plus an Additional 12 Million in Capital Injection!

Source: IPO Daily

Recently, Changzhou Sanxie Motor Co., Ltd. (hereinafter referred to as “Sanxie Motor”) has entered the second round of inquiry at the Beijing Stock Exchange (BSE) for its IPO.

Sanxie Motor’s listing journey has not been smooth sailing.

At the end of 2023, Sanxie Motor’s IPO was accepted by the BSE, with Northeast Securities Co., Ltd. as the sponsor. On January 29, Sanxie Motor received an inquiry letter from the BSE. On February 27, the company did not respond in time but stated that it would request a 20-working-day extension, submitting its reply to the inquiry letter by March 29. On March 28, Sanxie Motor announced the suspension of review due to the expiration of its financial report validity, without replying to the inquiry letter. It was not until June 24 that the suspension was lifted, and the review for its public offering and listing resumed.

For this IPO, Sanxie Motor plans to issue 18 million shares publicly, raising approximately 159 million yuan, which will be used for the expansion project of its green energy-saving intelligent control motors, the construction of its R&D center, and to supplement working capital.

IPO Daily found that just before the IPO, Sanxie Motor “distributed dividends in a rush,” with the actual controllers, a married couple, receiving over 12 million yuan. However, the company also raised 12 million yuan to replenish liquidity, raising questions about the reasonableness of the dividend distribution; additionally, the company’s relationships with major clients and suppliers are “complicated,” with close ties and intertwined interests.

Source: Zhang Li

“Rush” Dividend Distribution Before IPO

According to the prospectus, Sanxie Motor is essentially a “family business.”

As of the signing date of this prospectus, the controlling shareholder is Sheng Yi, who directly holds 62.97% of the company; Zhu Shouqing directly holds 19.49%.

It is known that Sheng Yi and Zhu Shouqing are a married couple. Together, they control 82.46% of Sanxie Motor, making them the company’s common actual controllers.

Notably, just before the IPO, Sanxie Motor conducted a sudden dividend payout, most of which went into the pockets of the married couple.

The timing of this dividend is “intriguing.”

Public information from the BSE shows that on December 29, 2023, Sanxie Motor’s application was filed; meanwhile, the prospectus states that on November 15, 2023, the company held an extraordinary shareholders’ meeting to approve the 2023 semi-annual equity distribution plan, with just over a month between the two dates.

At the same time, according to the prospectus, Sanxie Motor did not distribute any other dividends during the reporting period.

Furthermore, based on the dividend amounts, Sanxie Motor distributed a total cash dividend of 15.0092 million yuan, based on its current total share capital of 38.485 million shares, with every 10 shares giving a bonus of 3.8 shares via stock issuance at a premium, and a cash dividend of 3.9 yuan per 10 shares. Before the dividend, the total share capital was 38.485 million shares; after the dividend, it increased to 53.1093 million shares.

Calculations show that Sheng Yi and Zhu Shouqing will receive dividends totaling 12.3766 million yuan.

In addition, the company’s raised funds include a plan to use 12 million yuan to supplement working capital.

First, a dividend of over 12 million yuan was paid, then 12 million yuan was raised to replenish liquidity—this sequence of actions is “coincidental.”

The China Securities Regulatory Commission (CSRC) has issued multiple policies to clarify requirements for listed companies’ dividends.

In December 2023, the CSRC issued the “Guidelines for the Supervision of Listed Companies No. 3—Cash Dividends,” further encouraging cash dividends and promoting higher dividend levels. In April 2024, the State Council issued opinions on strengthening regulation and risk prevention to promote high-quality development of the capital market, emphasizing “strengthening supervision of cash dividends,” “increasing incentives for high-quality dividend companies,” and “promoting multiple dividends per year, pre-dividends, and dividends before the Spring Festival.”

Consistent and stable dividends help enhance investor returns, foster long-term value investment concepts, and promote steady and healthy market development. However, how to distribute dividends, how to do so reasonably, and whether there is over-distribution are issues that listed companies need to pay attention to.

“Twisted” Relationships with Partners

The prospectus shows that Sanxie Motor was founded in 2002 and is engaged in R&D, manufacturing, and sales of control motors, mainly including stepper motors, servo motors, brushless motors, and related products.

From the financial data, during 2020 to June 2023 (the “reporting period”), Sanxie Motor’s operating revenue was 196 million yuan, 282 million yuan, 287 million yuan, and 162 million yuan, respectively, with profits of 22.066 million yuan, 25.630 million yuan, 27.044 million yuan, and 22.275 million yuan. The gross profit margins were 26.95%, 19.92%, 22.31%, and 28.84%.

IPO Daily found that Sanxie Motor’s relationships with customers and suppliers are “complicated.”

Looking at gross profit margins, the company’s gross margin saw a significant increase in 2023. In 2022 and 2023, the gross margins were 22.31% and 28.47%, respectively, compared to the industry average gross margins of 25.60% and 25.83%.

It is known that the main trading partners are Nanjing Nuoite Mechanical and Electrical Equipment Co., Ltd., Hangzhou Aidong Electrical Equipment Co., Ltd., and Changzhou Xiangbo Intelligent Technology Co., Ltd., with sales revenue proportions of 96.22%, 91.06%, and 85.22%, respectively. However, the gross profit margin on sales of stepper motors to trading partners is lower than that from manufacturers, while the gross margin on sales of brushless motors is higher.

Regarding procurement and sales amounts, during the reporting period, the company’s purchases from Chuzhou Hamps were 17,800 yuan, 19,800 yuan, and 11.64 million yuan, with a sharp increase in 2023. The top five customers, Hamps and Hefei Bolin, mainly sell to the company’s major trading partner Nanjing Nuoite. The company’s sales to Nanjing Nuoite were 16.3388 million yuan, 16.9724 million yuan, and 10.0963 million yuan, with a significant decrease in 2023.

Additionally, the BSE found that the company’s largest customer, Raycus Intelligent, indirectly held 9.79% of Sanxie Motor’s shares through Wenzheng Jingming in September 2022. During the reporting period, the company mainly sold stepper motors and brushless motors to Raycus, with amounts of 3.2387 million yuan, 12.8583 million yuan, 43.1176 million yuan, and 22.856 million yuan, accounting for 1.65%, 4.56%, 15.02%, and 14.08% of the company’s revenue, respectively. After the investment, transaction amounts increased significantly.

Meanwhile, Sanxie Motor’s key customers, such as Hamps, are both customers and suppliers, mainly purchasing motor parts or prototype motors for R&D. The general manager of Nuoite, Ye Haicheng, is also the former head of the company’s Nanjing branch and has jointly invested with the actual controller Sheng Yi in Luoyi Tech.

It is worth noting that Hamps is controlled by Wang Hongbo, who joined Sanxie Motor in Shenzhen in 2021 and became the general manager of Shenzhen Sanxie. Wang Hongbo exited in 2023.

Additionally, Changzhou Xiangbo Intelligent (formerly Changzhou Sanxie Information Technology Co., Ltd.), one of the top ten customers, was established in December 2020, immediately engaging in transactions with the company and becoming a top ten customer in 2021. Tianyancha shows that Changzhou Xiangbo mainly engages in manufacturing of computers, communications, and other electronic equipment, with zero employees currently insured.

Furthermore, Sanxie Motor also faces issues with internal financial control irregularities.

During the reporting period, the company exhibited irregularities such as bill rounding, circulation of bills without genuine transactions, bill lending, discounting bills for related parties, endorsement transfers without signatures, operational errors in bill transfers, and other issues.

The related party Sheng Yueyao used personal cards to collect supplier sponsorship fees totaling 197,000 yuan.

During the reporting period, the company’s sales expenses included issuing invoices through Zhuji Rongyi Computer Socks Machine Repair Department (main operator: former employee Zhang Rongyi) to reimburse employees’ salaries, housing rent, and customer sponsorship fees without proper invoices.