Qingpu stock dives on resumption
Shares in Shanghai Qingpu Fire-fighting Equipment dropped 33.1 per cent yesterday on resumption of trading after the GEM-listed firm revealed it failed to disclose an expenditure of 12.8 million yuan.
Days after its initial listing in July last year the manufacturer of fire extinguishers contracted for the delivery of 4,050 tonnes of steel pipes worth 25.5 million yuan. Qingpu used more than half of its $20 million in proceeds from the initial public offering to pay a deposit to the pipe supplier who, eventually, failed to deliver.
While the firm's listing prospectus gave detailed accounts of how it planned to use all of the share sale proceeds, it made no mention of the 12.8 million yuan pipe deposit. It also failed to disclose the transaction to shareholders.
Qingpu's shares had been suspended since March, when its auditor resigned. Upon resumption of trading yesterday, the company announced the transaction constituted a breach of listing rules.
A filing to the stock exchange explained that because the pipe purchase agreement was made only days after the company's IPO, its executive directors 'did not have the experience in identifying and dealing with such transactions. As a result, the directors did not realise that the reporting requirements under the GEM Listing Rules would have been applicable'.
The company also announced that it failed to disclose a separate series of connected transactions worth 10.25 million yuan.
Between October last year and June 16, Qingpu agreed to spend 10.25 million yuan on six separate purchases of second-hand manufacturing equipment. In each case the seller was Shanghai High Pressure Container (SHP), a connected firm 65 per cent owned by Qingpu's controlling shareholder, Jiang Zhiqiang. SHP sold the equipment to Qingpu, in which Mr Jiang has a 33.77 per cent stake, through a variety of intermediary sales agents.
In December, Qingpu cancelled the original pipe purchase agreement because the supplier failed to deliver and was unable to return the 12.8 million yuan deposit. Qingpu told the supplier to pay the 12.8 million yuan to SHP, who would in turn use it to compensate the sales agents who helped unload the used factory equipment.
Qingpu's shares fell 24.5 cents yesterday to close at 49.5 cents.
