Financial constraints and litigation

The new press journalist Liu Daqun reported that, on 5 May, a further explanation of the punishment of the Deep-A (000023.SZ) was issued by the Bureau of Prosecution: the company had previously engaged in breach guarantees that had been lifted. A little earlier, A was fined by the Prosecutor for not disclosing the non-operational financial transactions with the controlling shareholders, failing to comply with the requirements for external security review procedures and disclosure of information. In a long-standing response, non-operating funds have been taken back and companies will be seriously restructured.

According to journalists, the large-scale non-operational financial occupation and non-compliance guarantees that have come to light at this time are being carried out in the context of tight operating pressure on their funds. At present, financial pressure has not materialized, there are a number of pending litigation peaks, and audit reports have been issued by audit bodies with emphasis on matters, corporate internal audit controls have been denied, companies have been subjected to special risk warnings and have been suspended for one day on 4 May. On 5 May, corporate equity prices collapsed.

The alleged irregularities amounted to over $300 million.

In its document, the Board noted that during the period from December 2021 to January 2023, the company funds were actually made available to the controlling shareholders in the name of external investment, advances, etc. Deep A did not disclose in the corresponding periodic report the non-operational occupation of corporate funds by the controlling shareholders. At the same time, in April and October 2021, A was granted a pledge for bank loans to others on two successive occasions by a large deposit. The above-mentioned security matters are not subject to review procedures and disclosure obligations.

Previously, the company’s audit body had rejected the company’s internal audit control. The audit body listed seven long-standing processes of non-operational financial occupancy by the actual controller A and his associates, indicating that the situation was a major flaw in financial reporting and that internal oversight was ineffective.

In response, Proximity A stated that the company had become aware of the mistakes and had committed itself to remedying the problems that existed. The company’s actual controllers and affiliates have spent a total of $137 million and have been returned as of the date of disclosure of the statements. The shareholders of the company’s holdings were previously issued a bill through the company’s flag, the Solar and Innovative Materials Ltd., which provided a loan guarantee of $250 million for Hiroshima City and Toyota Trading Ltd., and a bank loan was returned to Hiroshima City, where there are no irregularities.

Significant financial liquidity

At present, deep-rooted financial flows are under severe strain. The latest 2022 financial statements show that deep-day accounts remain at only $140 million, and, on this basis, corporate non-operational funds last year accounted for over 90 per cent of accounts. The company’s current liquidity liability amounts to $1.88 billion, with an asset liability rate of over 80 per cent, a new high since its listing.

At the same time, the company’s own blood-building capacity cannot be optimistic. Last year, cash flows from deep-day A operations were negative, with a significant reduction of 75 per cent in operating income and a loss of mother-to-child net profits for three consecutive years.

As a result of financial pressure, deep-rooted A was involved in a number of proceedings, mostly in the case of accused persons. As at 4 April, the cumulative total number of additional lawsuits by the company and its subsidiaries was 39, with a cumulative amount of approximately $887.9 million. Journalists found that 30 of the 39 proceedings related to contractual disputes, mainly because of the supply side’s demand for the payment of arrears, and more than six cases of labour disputes, mainly involving workers seeking salary arrears and bonuses. At present, A has become an unbelieved executive.

How to address the above issues, it was stated that companies were primarily seeking to improve the quality and efficiency of their operations, to reduce the efficiency, to build up the stock of assets, to increase asset liquidity and to mitigate financial risks, and to respond favourably to risks such as litigation compensation with professional lawyers.

It is worth noting that, on 5 May, in the sky of the renaming, the name of the equator was changed from “introspection A” to “ST deep-day”, for the first time since it was introduced in 1993 by the company of the deep-seated city (group) equity.