Huazhu group was sold short: Q1 loss of more than 2.1 billion yuan, denied false increase in profits, etc

category:Finance
 Huazhu group was sold short: Q1 loss of more than 2.1 billion yuan, denied false increase in profits, etc


It is hard to predict that China live group encountered short selling on the eve of listing. Subsequently, Huazhu group issued a Clarification Announcement, saying that the sources of information and data in the short selling report were groundless and unconfirmed, and denied the false increase in profits. However, before the short selling, affected by the epidemic situation, Huazhu group lost more than 2.1 billion yuan in the first quarter of 2020, and had a high debt.

Short selling on the eve of listing

Huazhu group, which returned from the US stock market to Hong Kong stock market, has not been peaceful recently.

Subsequently, Huazhu group, which is still trading in the US stock market, was affected by the report and its share price fell. On September 21, Huazhu groups shares closed at $40.48 per share, down 3.66%. Huazhu group, which is busy with its switch to Hong Kong stock listing, immediately issued a notice in response to the short selling, saying that based on the preliminary review and evaluation of the report, the company believes that the report has no basis. The report contains many errors, unsubstantiated statements and misleading conclusions about the companys business and operations.

Subsequently, on September 28, Huazhu group disclosed a more comprehensive Clarification Announcement, responding to five accusations made by bonitas research company for Huazhu groups inflated profits. However, bonitas research did not intend to let go Huazhu group. On September 29, it issued a supplementary short notice.

At this point, Huazhu group and bonitas Research Co., Ltd. have started a war of words between clarifying and publishing short selling announcement.

Denial of inflated profits

China Times reporter saw that bonitas research company said in the report that it counted 1258 Hotels with registered business license of Huazhu subsidiary. However, what Huazhu group disclosed in the US Securities and Exchange Commission is that by the end of 2019, the company has 688 self operated hotels, and the statistical values of the two are quite different.

At the same time, bonitas research company said that according to the registration of the Ministry of Commerce of China, Huazhu group has 3020 franchisees, which is 37% less than the 4930 hotels that Huazhu group has declared to manage and franchise by the end of 2019. In addition, bonitas research believes that Huazhu group has falsely reported the number of employees who have paid social security, and the minimum number of employees in the social security system is 3594 less than that reported to the sec.

Bonitas researchs third query against Huazhu group comes from related party transactions. Bonitas research company believes that Huazhu group uses undisclosed related party transactions to conceal operating expenses and exaggerate reported profits. In addition, Huazhu groups contractors include employees of Huazhu group who have not made disclosure.

Bonitas research company also calculated the PP & E value of Huazhu groups single room property, and found that the net PP & E value of Shanghai Jinjiang Group and ShouLv group was higher, while that of Huazhu group was lower. Therefore, bonitas research company believes that Huazhu group falsely reported the number of hotels, the number of employees, and the net value of PP & E, which led to a virtual increase of 2 billion yuan in the profits of Huazhu group in 2019.

In view of the encounter with bonitas research company short, China Times reporter interviewed the relevant person in charge of Huazhu group, which said that the relevant content can be seen in the announcement. According to the announcement released by Huazhu group, part of the data on the number of hotels of bonitas research company comes from the public comment website, and the data source is not authorized. At the same time, the company has not yet registered with the Ministry of commerce all franchise and management agreements of the group.

At the same time, Huazhu group also denied that there were current employees on the list of contractors. In view of PP & E value and other aspects, Huazhu group also thinks that the related query of bonitas research company is groundless. It believes that the long-term opening of the hotel is subject to higher depreciation and amortization, and the PP & E value should be calculated by the total value, rather than excluding the depreciation and amortization, and calculated by the net value of PP & E. After recalculation, Huazhu group found that the total PP & E value of the company was relatively higher than that of Shanghai Jinjiang Group and ShouLv group.

The loss in the first quarter was 2.135 billion yuan

As the current situation of foreign epidemic situation is still unclear, Huazhu groups overseas business is also facing resistance. In January 2020, Huazhu Group continued to expand its business and acquired German hotel. Since the end of March 2020, 85 of the 115 hotels in Germany have been temporarily closed. Although 92 German hotels have resumed operation since May 2020, the occupancy rate is low, only 29%.

On September 16, Huazhu group disclosed the offering price of HK $297 per share for its secondary listing in Hong Kong. It is estimated that the total proceeds from the global offering will be about HK $6.065 billion, of which 30% will be used by the group to repay part of its previous revolving credit financing. Some people in the industry believe that Huazhu group chose to be listed in Hong Kong stock market for the second time or to ease the pressure of capital. According to the data, as of June 30, 2020, the long-term debt of Huazhu group is about 9.24 billion yuan, and the short-term debt is 5.821 billion yuan. In response to the external query about the high debt, some media reported that at the Huazhu World Congress on September 29, Zhao Ruquan, CFO of Huazhu group, said: the short-term cash needs to be paid back is 1.2 billion yuan, but the unlimited cash of the group is 3.7 billion yuan, which is more than enough to repay. Source: China Times editor in charge: Zhang Mei_ NF2100

On September 16, Huazhu group disclosed the offering price of HK $297 per share for its secondary listing in Hong Kong. It is estimated that the total proceeds from the global offering will be about HK $6.065 billion, of which 30% will be used by the group to repay part of its previous revolving credit financing.

Some people in the industry believe that Huazhu group chose to be listed in Hong Kong stock market for the second time or to ease the pressure of capital. According to the data, as of June 30, 2020, the long-term debt of Huazhu group is about 9.24 billion yuan, and the short-term debt is 5.821 billion yuan. In response to the external query about the high debt, some media reported that at the Huazhu World Congress on September 29, Zhao Ruquan, CFO of Huazhu group, said: the short-term cash needs to be paid back is 1.2 billion yuan, but the unlimited cash of the group is 3.7 billion yuan, which is more than enough to repay.