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.

In March 2010, Huazhu group, a leading hotel group, was listed in the United States. On September 22, Huazhu group turned to Hong Kong stock market and began trading. However, on the evening of September 21, the eve of the listing of Huazhu group in Hong Kong, bonitas research company, a short selling agency, released a report, saying that Huazhu group secretly provided operating expenses to the companys employees or the franchised stores controlled by an undisclosed third party, resulting in a virtual increase of 2 billion yuan in profits in 2019.

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

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.

As for the query of bonitas research company on the low number of employees, Huazhu group said that the total number of employees disclosed by the company was the total number of employees at the fixed time point as of December 31, 2019, while the total number of employees in the relevant social security system was the total number of employees registered by the company in the whole year of 2019, including existing employees and resigned employees.

Therefore, Huazhu Group believes that the relevant query of bonitas research company is groundless. However, it is worth noting that on September 29, bonitas research company issued a supplementary announcement, holding that Huazhu group did not provide substantial evidence to refute. It seems that Huazhu group has no intention of expending energy on this matter. It has issued an announcement saying that the company has responded twice to this matter. Therefore, the company may not respond to the future charges of bonitas research company unless required by applicable laws or listing rules.

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