However, two people close to Ruixing told the surging news reporter that Lu Zhengyao was interfering with the special committees investigation into Ruixings financial fraud in order to consolidate his control over Ruixing coffee.
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.
Lu Zhengyao has yet to respond to the surging news.
At present, several banks, including Credit Suisse Group and Morgan Stanley, still have a debt gap of 300 million US dollars to Ruixing.
According to the announcement issued by Ruixing, the extraordinary general meeting of shareholders will be held in Beijing at 3:00 p.m. on July 5, and all shareholders of Ruixing can attend. In addition to discussing whether Li Hui, Liu Erhai, seanshao and Lu Zhengyao will be removed from the appointment, Ruixing coffee also mentioned in the announcement that it will discuss whether Yingzeng and Jieyang will be appointed as independent directors.
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.
According to the announcement, Yingzeng is now a partner of Orrick Herrington & sutcliffellp, with more than 25 years of work experience in the field of business and law; Jieyang now holds several positions in China University of political science and Law (CUPL), including Dean of business school, deputy director of MBA center, Chief Secretary of business school, etc.
He knew that his position as chairman of the board of directors could not be guaranteed. He was about to join his own people, so he pushed two new independent directors. He just thought that even if he was not in the future, the company would be under his control. A person familiar with the matter told surging journalists.
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.
In May this year, as the investigation of Ruixing coffee fraud continued to advance, the chief executive officer (CEO) Qian Zhiya, the chief operating officer (COO) Liu Jian and others involved in the fraud have been removed from their posts and have withdrawn from the board of directors.
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?
However, Lu Zhengyaos bank loans obtained by pledging his own, Qian Zhiyas and his sisters shares are in danger of not being fully recovered.
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.
On April 2, after the company admitted that there was financial fraud, Ruixing coffees share price fell sharply from $26.20, triggering the banks forced closing line. On April 6, Goldman Sachs announced that it was entrusted by various banks to dispose of these common shares. After that, the average share price of Ruixing coffee was $3.18.
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.
Kicking Li Hui and Liu Erhai out, the iron triangle relationship broke?
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.
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.
Its not just luck.
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