Chinese chip concept stock Lianchuang Optoelectronics exploded and was exposed to risk warning

Chinese chip concept stock Lianchuang Optoelectronics is suspected of having a huge amount of funds emptied by its major shareholders. The controlling shareholder Jiangxi Electronics Group has occupied 1.692 billion yuan (approximately NT$8.05 billion) of funds, which have not yet been repaid, causing Lianchuang Optoelectronics to be issued an additional risk warning (ST) by the Shanghai Stock Exchange. As of the end of June this year, there were as many as 76,700 Lianchuang Optoelectronics shareholders, all of whom are now at risk of being struck by thunderstorms.

Lianchuang Optoelectronics' main business includes laser series and traditional LED chips, intelligent control, backlight and application products. The company's self-inspection at the end of August found that its wholly-owned subsidiaries paid funds to related companies actually controlled by the controlling shareholder through signing trade agreements, making advance payments, etc., and these advances eventually flowed to the controlling shareholder.

However, a debt crisis subsequently broke out among the controlling shareholders, resulting in an advance payment of RMB 1.692 billion that could not be recovered, ultimately constituting the controlling shareholders' "non-operating capital occupation" of the listed company. Since the repayment had not been completed one month after the expiration of the period, Lianchuang Optoelectronics suspended trading for one day on September 29. After trading resumed on September 30, it was officially listed as ST, and the stock abbreviation was also changed to "ST Lianguang".

Bad news hit stock prices hard. ST Lianguang dropped to the limit after resumption of trading on September 30, closing at 12.2 yuan per share. Since the beginning of this year, the stock price has plummeted 80.65%. As of the end of June this year, the number of shareholders of the company reached 76,700, and a large number of investors were in trouble.

What’s even more troublesome is that the crisis has spread from the major shareholder’s capital occupation to Lianchuang Optoelectronics itself. The company has been dragged down by the debt problems of its controlling shareholder, with banks withdrawing loans, cutting off loans, some debts being overdue, bank accounts being frozen, and the equity of its subsidiaries being frozen. As of September 16, the overdue principal of loans and bills from Lianchuang Optoelectronics and its subsidiaries from financial institutions totaled 1.439 billion yuan (approximately NT$6.85 billion), accounting for 32.26% of net assets.

Regulatory authorities have also taken action. Lianchuang Optoelectronics announced in August that the China Securities Regulatory Commission had decided to open an investigation because the company and its chairman Wu Rui were suspected of failing to disclose non-operating capital transactions in accordance with regulations and other illegal activities. Faced with issues such as capital occupation, controlling shareholder debt crisis, and bank loan withdrawals, Lianchuang Optoelectronics’ latest response stated that it is currently in the cooperating investigation stage and is not convenient for interviews.