Changpeng Wan
Regulatory Scrutiny Intensifies Over Tianpu Co.’s Control Change
Tianpu Co. (605255.SH) resumed trading with yet another limit-up, marking its tenth consecutive涨停 (limit-up) session. This surge follows the company’s partial response to a regulatory inquiry from the Shanghai Stock Exchange (SSE) regarding its ongoing control change process. The SSE’s late-August supervisory letter posed seven critical questions, targeting key concerns: acquisition purpose, funding sources of acquirer Zhonghao Xinying, funding sources of Hainan Xinfan, concerted action relationships, insider information control, potential delisting risks, and information disclosure. Tianpu Co. addressed only the second to sixth items, clarifying details about who is contributing how much, where the money is coming from, and when it will arrive.
The responses reveal a transaction heavily reliant on promises: all funders claim to use “self-owned funds,” billions in capital are committed for “September arrival,” most valuation adjustment mechanisms (VAMs) are waived, and assurances of “no pledges, no loans” are provided. However, deeper analysis shows that the primary acquirer, Zhonghao Xinying, may not be as financially robust as claimed. Their acquisition funds are assembled from various sources, including Series B financing and even accounts receivable worth RMB 500 million. Critical questions remain: Will the funds arrive on time? Do the VAMs hide debt risks? Are the no-pledge commitments reliable? These uncertainties cast a shadow over the entire deal.
Acquirer’s Funding Sources: Zhonghao Xinying Shifts to “Fully Self-Owned Funds”
According to relevant announcements, the acquisition of Tianpu Co.’s control rights is primarily executed by Yang Gong Yifan through entities like Zhonghao Xinying and Hainan Xinfan Enterprise Management Partnership. Initially, Zhonghao Xinying’s funding was described as a mix of self-owned and self-raised funds, potentially including bank loans secured by pledging the acquired shares. In the latest response, Tianpu Co. revised this to “fully self-owned funds,” a significant adjustment addressing market sensitivities.
The company provided a breakdown of “available funds”: As of August 28, 2025, Zhonghao Xinying’s book cash balance was approximately RMB 746 million, unused earnest money for the tender offer was RMB 165 million, and pending equity financing was about RMB 140 million, totaling roughly RMB 1.051 billion. This sum purportedly covers the RMB 965 million needed for the agreement transfer and capital increase, leaving a surplus of around RMB 147 million. Notably, this amount excludes potential funds required for Zhonghao Xinying’s comprehensive tender offer. Based on the tender offer report summary, assuming a maximum acquisition of 33.52 million shares at RMB 23.98 per share, an additional RMB 804 million might be needed, bringing the total potential requirement to approximately RMB 1.769 billion.
To bridge this funding gap, Zhonghao Xinying’s second interim shareholders’ meeting on August 19, 2025, approved reallocating Series B raised capital towards this transaction’s payment. The “pending equity financing” includes a RMB 50 million tail payment from Xingluo Zhonghao’s September 2024 capital increase and a RMB 90 million增资款 (capital increase payment) from Xingluo Zhonghao in August 2025, both part of Zhonghao Xinying’s Series B financing. Zhonghao Xinying has undergone five Series B rounds, raising over RMB 1.2 billion in total.
Xingluo Zhonghao’s Role and Funding Structure
Xingluo Zhonghao, a subsidiary of ChiNext-listed Aibrun Inc. (301259.SZ), is the lead investor in Zhonghao Xinying’s Series B. It invested RMB 250 million in September 2024 and decided to追加投资 (add investment) of RMB 165 million in June 2025, split between a capital increase and equity transfer. The capital increase portion, RMB 90.0496 million, was ultimately funded by Aibrun using self-owned funds of RMB 90 million. Simultaneously, Xingluo Zhonghao introduced a new investor, Chongqing Yongrui, who plans to invest RMB 75 million via capital increase.
Multiple Pledge Restrictions and VAM Risks Loom
With the leveraged buyout halted, the acquirer must self-fund entirely and is subsequently barred from pledging the acquired shares. Zhonghao Xinying initially intended to use the acquired shares as collateral for bank loans to finance the purchase but has now switched to entirely self-owned funds.
The announcement repeatedly emphasizes that Zhonghao Xinying and its affiliates will not pledge the acquired shares for financing post-acquisition. The shares will be subject to lock-up periods ranging from 18 to 36 months after transaction completion. Tianpu Holding also committed not to increase its registered capital before the deal closes, aiming to protect public shareholders’ interests.
Zhonghao Xinying pledged not to transfer shares acquired via the tender offer for 36 months post-completion and not to transfer Tianpu Holding股权 (equity) obtained through this transaction for the same period. Crucially, during Yang Gong Yifan’s tenure as Tianpu Co.’s actual controller, no shares acquired through this transfer or tender offer will be pledged. Fang Donghui made a similar commitment regarding shares obtained via the agreement transfer during his status as a concert party. Tianpu Holding承诺 (promised) not to pledge its pre-acquisition shares.
Potential Reactivation of VAM Clauses
While raising funds independently, Zhonghao Xinying faces the potential reactivation of financing VAM clauses. As of the response date, VAM agreements from previous equity financings created contingent liabilities of approximately RMB 1.642 billion. About RMB 1.071 billion has been waived via signed repurchase exemption letters, deemed invalid from inception. Roughly RMB 381 million in exemptions have received “preliminary consent” and are under internal processing, while about RMB 190 million remains without clear exemption approval.
“Preliminary consent” does not equate to legally released repurchase obligations. The announcement explicitly warns that if this transaction fails, some waived or preliminarily consented clauses might “reactivate” or be claimed by rights holders, posing a recourse risk to the acquirer. Any exemption not fully converted into a written, enforceable waiver could trigger repurchase or compensation clauses, altering Zhonghao Xinying’s cash flow and debt pressure. Failure could expose Zhonghao Xinying to liabilities of RMB 1.642 billion.
Currently, Zhonghao Xinying’s main external debt is RMB 322 million in short-term bank loans, mostly maturing in the second half of 2026. Plans to address this include using operational surplus, loan extensions, or other working capital loans.
Will Hainan Xinfan’s Funds Arrive by September?
The other acquisition entity, Hainan Xinfan, needs to contribute approximately RMB 395 million, also claimed as self-owned funds. However, these funds are not yet in place. Neither Hainan Xinfan nor its executive affairs partner, Shanghai Xinfan’s shareholders, have completed their capital contributions.
Tianpu Co. outlined the出资金额和时间 (contribution amounts and timing) for Shanghai Xinfan and Hainan Xinfan: Yang Gong Yifan and some Zhonghao Xinying shareholders pledged RMB 204 million to Shanghai Xinfan using self-owned funds, with expected contribution time in September 2025. Shanghai Xinfan, its current round investors, and部分经营管理层 (part of Zhonghao Xinying’s management) plan to collectively contribute RMB 401 million to Hainan Xinfan, also expected in September 2025.
With September now underway, if these fund “arrival times” are critical conditions for transaction completion, the entire process is compressed into a brief, highly sensitive window. If “expected contributions” don’t materialize as “funds received,” it could impact the tender offer or capital increase progress.
Overall, Yang Gong Yifan’s controlled entities, Zhonghao Xinying and Hainan Xinfan, are contributing RMB 1.36 billion, accounting for 64.03% of the transaction value, making them the primary funders. Fang Donghui is contributing RMB 764 million (35.97%), also声称 (claimed) as self-owned funds. Beyond the concerted action agreement in this transaction, no other arrangements exist between Fang Donghui and Yang Gong Yifan’s affiliates.
Suspected Insider Information Leakage
The SSE’s supervisory letter pointed out that Tianpu Co. applied for a trading halt on August 14, 2025, due to planning the control change. Before the halt, the company’s stock price hit limit-up for two consecutive trading days on July 25 and July 28, triggering abnormal trading fluctuations. Furthermore, market rumors about Zhonghao Xinying’s intended acquisition emerged before the official announcement post-halt, suggesting potential premature disclosure of insider information.
Tianpu Co. detailed the control transfer’s planning process, key timelines, and involved personnel: Initial discussions started on August 1, 2025, involving the acquirer and relevant intermediaries. Three论证咨询 (demonstration consultations) occurred on August 3, 13, and 14, involving the listed company, acquirer, and intermediaries. Meetings and calls during the halt from August 14-21 involved the same parties.
Registered insiders aware of the inside information include the listed company and its directors, supervisors, senior management (Tianpu Co., You Jianyi, etc.), the listed company’s controlling shareholder, largest shareholder, actual controller and their directors, supervisors, senior management (Tianpu Holding, You Jianyi, Wu Xubin,范建海), the acquirer or significant asset transaction party and their controlling shareholders, actual controllers, directors, supervisors, senior management (Zhonghao Xinying, Hainan Xinfan, Fang Donghui, Yang Gong Yifan, etc.), third-party professional institutions and their legal representatives and handlers,以及前述规定的自然人的配偶、子女和父母 (and spouses, children, and parents of the aforementioned natural persons).
Outstanding Regulatory Queries
As of now, Tianpu Co. has not responded to the SSE’s inquiries regarding the “acquisition purpose” and specific details of the transaction scheme, such as “partial agreement transfer payment arrangements, performance compensation targets, performance compensation methods, and the timing for handling transfer registration procedures with China Securities Depository and Clearing Corporation.” Continued monitoring is essential for these unresolved regulatory issues.
Key Takeaways and Investor Considerations
The Tianpu Co. control change saga highlights the complexities and risks in major acquisitions, especially those involving leveraged structures and tight funding timelines. The shift to fully self-owned funds by Zhonghao Xinying, while addressing immediate regulatory concerns, introduces new uncertainties regarding the actual availability and timing of these funds. The reliance on contributions expected in September creates a critical dependency, and any delay could jeopardize the entire transaction.
The potential reactivation of VAM clauses poses a significant financial risk, underscoring the importance of thorough due diligence on acquirers’ contingent liabilities. The stringent no-pledge commitments, though protective for public shareholders, limit the acquirer’s financial flexibility post-acquisition. The suspected insider information leakage prior to the official announcement raises questions about information integrity and market fairness, areas where regulators are increasingly vigilant.
For investors, this case serves as a reminder to scrutinize the funding sources and financial health of acquirers in control change transactions. The promises of self-owned funds and timely contributions must be backed by verifiable evidence. Understanding the terms of VAMs and other contingent liabilities is crucial to assessing the true financial burden on the acquirer. Lastly, monitoring regulatory responses and ensuring transparent disclosure can help mitigate risks associated with potential insider trading and incomplete information.
Stay informed by following updates from regulatory bodies and financial news platforms. Conduct independent research and consult financial advisors before making investment decisions based on such high-stakes corporate actions.
