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Hong Kong Found Tianhe Chemicals & Executive Director Guilty of Overstating Revenue by $1.05 Billion in IPO Prospectus

28th January 2022 | Hong Kong

The Hong Kong Market Misconduct Tribunal (MMT) has found Tianhe Chemicals Group and Executive Director Wei Xuan guilty of overstating group revenue by $1.05 billion (CNY 6.7 billion) in its IPO prospectus.  Wei Xuan, who was a substantial indirect shareholder and chief executive officer of Tianhe at the material time, was disqualified from being a director and being involved in the management of a listed company for 4 years.  An order was made to Tianhe Chemicals Group and Wei Xuan not perpetrate any conduct which constitutes market misconduct, and to pay costs to the Government and the Hong Kong Securities and Futures Commission (SFC).  The proceeding was brought by Hong Kong Securities and Futures Commission (SFC).  Tianhe had issued the prospectus on 9 June 2014 for its IPO in Hong Kong and raised net proceeds of approximately $550 million (CNY 3.52 billion). (IPO ~ Initial Public Offering)

“ HK Found Tianhe Chemicals & Executive Director Guilty of Overstating Revenue by $1.05 Billion in IPO Prospectus “

 


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Official Statement

Hong Kong Exchange

The Market Misconduct Tribunal (MMT) has found Tianhe Chemicals Group Limited (Tianhe) and its executive director, Mr Wei Xuan culpable of market misconduct by issuing false or misleading IPO prospectus to overstate the company’s revenue by over RMB6.7 billion following proceedings brought by the Securities and Futures Commission (SFC) (Notes 1 & 2).

The MMT is satisfied that the IPO prospectus contained materially false or misleading information regarding Tianhe’s revenues and profits for its track record period for the financial years from 2011 to 2013 and makes the following order:

  • Wei, who was a substantial indirect shareholder and chief executive officer of Tianhe at the material time, was disqualified from being a director and being involved in the management of a listed company for four years;
  • an order that each of Tianhe and Wei shall not perpetrate any conduct which constitutes market misconduct; and
  • an order against Tianhe and Wei to pay costs to the Government and the SFC (Notes 3 to 5).

The MMT is also satisfied that 53% of Tianhe’s total track record revenue of RMB12.6 billion disclosed in the prospectus was overstated.  The overstated revenue and profits were likely to induce subscriptions for or purchases of the shares of Tianhe and/or to increase the share price of Tianhe in Hong Kong.

The MMT concludes that Tianhe and Wei were reckless as to whether the overstated revenue and profits in the prospectus were false or misleading when authorising the issuance of the prospectus.

Tianhe issued the prospectus on 9 June 2014 for its IPO in Hong Kong and raised net proceeds of approximately $3.52 billion.

End

Notes:

  1. The SFC instituted proceedings in the MMT against Tianhe and Wei for market misconduct under section 277 of the Securities and Futures Ordinance (SFO).  A copy of the SFC’s Notice of the MMT proceedings is available on the MMT’s website.  Please see the SFC’s press release dated 7 September 2020.
  2. The SFC suspended the share trading of Tianhe on 25 May 2017 under section 8 of the Securities and Futures (Stock Market Listing) Rules.  The shares of Tianhe were delisted by the Stock Exchange of Hong Kong Limited with effect from 11 June 2020.
  3. Under section 257(1)(a) of the SFO, an order prohibiting a person to take part in the management of a listed company without the leave of the Court of First Instance.
  4. Under section 257(1)(c) of the SFO, an order to prohibit a person who is the subject of the order not to engage in any form of market misconduct in the future.
  5. Under sections 257(1)(e) and (f) of the SFO, orders that a person shall pay costs incurred by the Government and the SFC.



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