Amethystum Storage faces delisting after US$5 million fine for accounting fraud, raising questions over rash of tech listings
- CSRC notified the company of the penalty on Friday and warned that it may be forced to delist from Shanghai’s Star market
- Amethystum Storage’s fall from grace has raised concerns about a crop of companies that have chosen to list amid China’s domestic tech drive
Chinese optical storage firm Amethystum Storage faces a delisting from Shanghai’s Nasdaq-like tech board amid a fraud investigation, two years after its initial public offering and raising concerns over the rapid increase in listings amid the country’s drive towards greater technology self-reliance.
The China Securities Regulatory Commission, the country’s securities watchdog, has fined Amethystum Storage 36.7 million yuan (US$5.1 million) for fabricating sales and profit figures in its prospectus and failing to disclose its external guarantees to investors, according to a company filing over the weekend.
CSRC notified the company of the penalty on Friday and warned that it may be forced to delist from Shanghai’s Star market, the company said in its filing. The company has not received a formal decision yet on delisting and will fully cooperate with the CSRC, it added.
Back in 2020, Amethystum Storage was the first optical storage firm to list on the Shanghai Star market, the exchange board dedicated to technology and innovation companies, and its stock price rose nearly threefold on its debut. However, the company is down 94 per cent from a peak on the first day of trading.
Amethystum Storage’s fall from grace has raised concerns about a crop of tech companies that have chosen to list amid China’s drive to achieve greater independence in strategic technologies. For example, the semiconductor sector – a core area in this vision amid US trade sanctions – has been hit by a rash of fraud and corruption investigations related to the country’s Big Fund, which is dedicated to the capital-intensive chip industry.
A number of the Big Fund’s executives are under investigation for corruption, and the Wuhan Hongxin Semiconductor Manufacturing Company (HSMC) was exposed in 2020 as an elaborate hoax, failing to produce a single chip despite huge promotion and initial investment from the local government.
Amethystum Storage, which is based in Meizhou city in southern Guangdong province, has grown rapidly since its establishment in 2010 by providing data storage solutions to data centres and enterprises, riding on China’s efforts to boost big data amid the country’s digital transformation.
As a home-grown company, it has played into the country’s drive to promote domestic companies in the information technology sector to ensure self-reliance and data security. The company now serves industries ranging from finance and telecommunications to healthcare and government, according to the company’s interim report.
However, Amethystum Storage was put under investigation by the CSRC in March and a probe found that it had fabricated a total of 210 million yuan in profit from 2017 to 2019, including 90 per cent of the 2019 profit it declared in its prospectus.
Apart from the company, executives and employees involved in the fraud were fined a total of 58 million yuan, and its chairman Zheng Mu and board member Luo Tiewei have been banned from entering the securities market.