A person close to Ruixing said that after cleaning up the external independent directors through this method, even if he is not in the position of chairman of Ruixing, Lu Zhengyao is still the largest shareholder of Ruixing coffee and currently has the absolute control of the company.
Another person close to Ruixing said that as early as mid March, Ernst & Young had submitted the report of Ruixings financial fraud to the corresponding independent directors, and a number of external independent directors supported the disclosure of Ruixings financial fraud, which triggered Lu Zhengyaos hatred.
At present, several banks, including Credit Suisse Group and Morgan Stanley, still have a debt gap of 300 million US dollars to Ruixing.
Lu Zhengyao asked for a general meeting of shareholders to discuss the whereabouts of Ruixings major personnel
On the same day, Haode investment, a family trust controlled by Lu Zhengyao, sent a letter to the shareholders meeting of Ruixing coffee, asking for the convening of the independent board of directors, proposing the above-mentioned resolution to replace the independent directors, including removing the positions of independent directors seanshao, Lihui and Liu Erhai, and discussing whether to appoint Yingzeng and Jieyang as independent directors, while Yingzeng and Jie were appointed as independent directors Yang is Lu Zhengyaos own man.
Another person familiar with the matter said that Lu Zhengyao was already hateful to several external directors because of his initial support for making Ruixings financial fraud public.
The person familiar with the matter said that as early as mid March, Ernst & Young had reported to a number of independent directors about Ruixings financial fraud, among which a number of independent directors supported the disclosure of Ruixings fraud. Subsequently, under the attention of public opinion, the supervision enters the market, the companys executives are exempted, and Lu Zhengyao himself may face criminal prosecution, all of which cause Lu Zhengyaos hatred.
Previously, on April 2, Ruixing coffee announced that Liu Jian, the chief operating officer of the company, had been found to have made false financial statements, involving about 2.2 billion yuan in transaction value. The board of directors of the company set up a special committee to conduct internal investigation. In addition, a number of US law firms launched a class action against Ruixing coffee, accusing it of making false and misleading statements in violation of US Securities Law.
Lu Zhengyao is also likely to face criminal prosecution for Ruixings financial fraud.
At the beginning of June, according to Caixin, citing regulators, the relevant departments have obtained the mandatory e-mail of Ruixing Chairman Lu Zhengyao about the companys financial fraud. Lu Zhengyao will be prosecuted, and is likely to face criminal prosecution.
In addition, last week, Lu Zhengyao resigned as chairman and non-executive director of the Shenzhou car rental board, and his shares in Shenzhou Youche have all been frozen by the judiciary, which is believed to be a move to further cut relations with Ruixing coffee.
Earlier, according to the Wall Street Journal, the counterfeiting of Ruixing coffee involved upstream and downstream. Not only did employees design fake transactions to increase sales, but also companies associated with Lu Zhengyao bought a large number of vouchers and forged orders of at least 1.5 billion yuan.
There is still a $300 million gap in bank debt. How much control can Lu Zhengyao have?
According to Wande data, as of January 21, 2020, among the top three shareholders of Ruixing coffee, Lu Zhengyao holds 23.94%, Qian Zhiya, the former CEO of Ruixing coffee, holds 15.43%, and Wang Sunying, Lus sister, holds 9.72%.
According to the prospectus of Ruixing coffee, as of January 2020, Lu Zhengyao holds 4851500 class B common shares of Ruixing coffee, equivalent to 36.86% of the voting rights. Lu Zhengyao has pledged part of his personal shares (145455450 class B common shares), as well as 610800752 common shares held by Qian Zhiya and his sister Wong Sunying, and obtained a loan of 518 million US dollars from the bank.
According to Bloomberg news on June 16, lenders, including Haitong International Securities Group and Goldman Sachs Group, have sold Lu Zhengyaos mortgaged shares of Ruixing in the past two months, raising about $210 million, people familiar with the matter said. In a statement at the time, Goldman Sachs said that Lu Zhengyao defaulted on $518 million in margin debt in early April after the news of financial fraud caused Ruixing coffee shares to plummet. After selling the shares pledged by Lu Zhengyao, several banks, including Credit Suisse Group AG and Morgan Stanley, still face a $300 million gap in their debt to Ruixing.
As Lu Zhengyao provides unlimited joint and several liability guarantee for the Pledged Shares, the bank claims the right to recover Lu Zhengyaos personal property to repay the debts, including the remaining shares he holds in Ruixing coffee.
To this end, the aforementioned people close to Rui said that Lu Zhengyaos method of interfering with the investigation of the special committee was stupid, sooner or later, his shares will be taken away by the bank, which is a matter of time.
At the end of June 19 local time, shares of Ruixing coffee fell 3.54% to close at $3.82.
Ruixing coffee is one of the companies in Shenzhou department. The largest shareholders of Shenzhou car rental and Ruixing coffee are Lu Zhengyao. Liu Erhai, founding partner and executive partner of joy capital, Li Hui, founding partner of Dazheng capital and former president of Huaping investment group in Asia Pacific region, all have deep ties with Lu Zhengyao. They are also known as Shenzhou iron triangle.
But if Lu Zhengyao does try to kick Li Hui and Liu Erhai out this time, it can be said that the iron triangle relationship has broken.
Dazheng capital and joyful capital participated in two rounds of investment of 200 million US dollars each for Ruixing coffee a and B. According to Wande data, as of January 21, 2020, among the top five shareholders of Ruixing coffee, Lu Zhengyao holds 23.94%, Qian Zhiya, former CEO of Ruixing coffee, holds 15.43%, Wang Sunying, Lu Zhengyaos sister, holds 9.72%, Li Hui and Liu Erhai are the fourth and fifth shareholders, with 7.15% and 5.3% respectively.
On January 8, 2020, Dazhen capital reduced 38.4 million shares of Ruixing, with the shareholding ratio reduced from 14.06% to 12.15%, and cashed out $230 million. On February 13, joyful capital officially issued a statement saying, since the investment in Ruixing coffee in 2018, joyful capital and its related parties have never sold any shares of Ruixing coffee.
When Lu Zhengyaos first IPO of car rental in Shenzhou failed, Li Hui invested $200 million in car rental from Huaping, where Li Hui was then. After leaving Huaping in February 2016, Li Hui briefly became Vice Chairman of the company. In 2017, Li Hui founded Dazheng capital. Li Hui is also the chairman and managing partner of the excellent car industry fund created by Lu Zhengyao. Liu Erhai has invested in three companies founded by Lu Zhengyao, namely, in 2006, in Shenzhou car rental, in 2015, and in 2016, in Ruixing coffee.
Relevant recommendation: Board of directors of Ruixing coffee reshuffle in the next months general meeting of shareholders or confirm that Lu Zhengyao is out of Ruixing coffee, another independent director resigns, and only two members of the audit committee remain, Qian Zhiya exits from Ruixing coffees associated company as a legal person, but Ruixing is still the largest shareholder. Before Ruixings self disclosure, the email of board members was hacked by hackers. Source: surging news editor: Yang Bin_ NF4368