Changpeng Wan
The Rapid Rise and Hidden Dangers of *ST Jintai
In just one month, *ST Jintai (300225.SZ) saw its stock price surge nearly 60%, making it the top performer among delisting-risk stocks. However, behind this impressive rally lies a web of governance risks, disclosure irregularities, and ongoing internal conflicts. Recent developments reveal that the company received a Notice to Collect Evidence from police authorities, adding another layer of uncertainty for investors. This article delves into the key issues surrounding *ST Jintai, from its controversial strategic stockpile suppliers to questionable accounting practices and boardroom disputes. Understanding these governance risks is crucial for anyone monitoring China’s high-risk equity segments.
Police Investigation and Disclosure Oversights
The Unannounced Evidence Collection
In a significant but undisclosed development, *ST Jintai recently received a Notice to Collect Evidence from police authorities. The notice relates to a report filed by company director Liu Ruiming (刘锐明) alleging potential illegal activities by Pei Jian (裴剑), whom Liu identifies as the shadow controller of *ST Jintai, and Luo Dian (罗甸), a current director and former chairman. Despite the seriousness of this matter, the company has not made any public announcement, raising concerns about transparency and disclosure compliance. When contacted, *ST Jintai’s board secretary and new president, Wu Chunchao (吴纯超), confirmed that the company is “cooperating with the investigation” but argued that disclosure is only required for formal立案侦查 (case filing). This stance contrasts with other listed firms like Sirrun Medical (300078.SZ), which proactively disclosed similar notices.
Shareholder Movements and Regional Ties
The company’s shareholder registry reveals intriguing details. Hao Daqing (郝大庆) increased his stake by 1.16 million shares in Q2, becoming the third-largest shareholder. Soon after, he was elected to the board and appointed chairman. Since his share purchases occurred before he became a senior executive, disclosure was not mandatory. Sources indicate Hao Daqing was introduced to *ST Jintai by Pei Jian, with both hailing from Shanxi province. Hao’s directorship nomination lists him as chairman of Shenzhen Hengyang Times Industrial Co., Ltd., whose contact number is registered to a mobile phone in Taiyuan, Shanxi. Adding to the mystery, CITIC Securities Shanxi Branch appeared on the stock’s trading dragon tiger榜 (list of top traders) in April, buying over 16 million yuan—a record for this typically low-profile brokerage since 2021.
Strategic Stockpile Suppliers and Fund Usage
Ambiguous Classification of Fund Occupancy
*ST Jintai’s semi-annual report disclosed approximately 151 million yuan in new fund occupancy by five strategic stockpile suppliers: Ruinai Trade (Shanghai) Co., Ltd., Shanghai Benghu Trade Co., Ltd., Shanghai Kanyue Trade Co., Ltd., Shanghai Shengyouning Industrial Co., Ltd., and Shanghai Taikula Trade Co., Ltd. The company classified these as “non-operational fund occupancy by related parties” due to the high procurement ratio from these suppliers. However, it simultaneously claimed that, based on available information, these suppliers show no equity control or concerted relationship with shareholders. This contradictory classification has drawn criticism from accounting experts, who argue that external suppliers cannot be directly labeled as related parties unless controlled by directors, supervisors, senior management, or major shareholders.
Interest Charges and Authenticity Concerns
Notably, *ST Jintai has not charged interest on these occupied funds, which知名财税审计专家 (well-known financial and audit expert) Liu Zhigeng (刘志耕) highlights as a red flag. If the fund usage were genuinely for strategic stockpiling, interest charges would be unnecessary. However, if it constitutes non-operational fund occupancy, interest must be applied. The absence of interest raises suspicions of potential under-the-table fees or even舞弊 (fraud), which could involve legal and tax violations. Liu emphasizes that abnormal fund occupancy often lacks proper documentation, leading to vague or shifting responses during regulatory inquiries—a pattern observed in *ST Jintai’s disclosures.
Accounting Irregularities and Financial Red Flags
Unusual Treatment of Business Exchange Items
The company’s financial statements show puzzling entries under “other receivables” and “other payables.” Specifically, 9.91 million yuan was recorded as “business exchange” under other receivables, while 39.15 million yuan appeared under other payables for the same category. Director Liu Ruiming’s 23 questions pointedly ask why business exchanges would create receivables and what specific transactions these represent. Accounting professionals note that business exchange costs should typically be expensed, reducing profits. Capitalizing these amounts is rare and unreasonable for listed companies, suggesting potential manipulation or concealment.
Prepayments and Long-Term Occupancy
*ST Jintai’s prepayments account totaled 33.82 million yuan, with over 14 million yuan aged超过一年 (exceeding one year)—including some over three years. Given that prepayments are usually for raw material purchases, such extended durations are highly unusual. Liu Zhigeng notes that prepayments exceeding 40% of the total balance are uncommon and may serve as hiding spots for fund occupancy. Without clear explanations, these aged prepayments could indicate non-operational fund usage or require impairment provisions, further eroding profits.
Boardroom Conflicts and Governance Challenges
Director Opposition and Abstentions
The company’s semi-annual report faced intense scrutiny from within. Director Liu Ruiming raised 23 objections, questioning revenue authenticity and asset quality. Meanwhile, independent director Ma Weihua (马维华), who has a financial background, abstained from voting on the report due to uncertainties about recovering strategic stockpile funds. These internal dissentions reflect deep-seated governance issues and a lack of consensus on financial integrity and disclosure practices.
Lease Liabilities and Cash Flow Concerns
Liu’s questions also targeted 6.8 million yuan in lease liabilities for four properties, demanding clarity on their usage and cost justification. Beyond leases, the company’s cash flow deteriorated sharply, with operational cash flow dropping to -75.9 million yuan from 37.86 million yuan a year earlier. Management attributed this to awaiting the recovery of strategic stockpile funds, but critics argue the outflow stems from continued payments to suspicious suppliers.
Merger Performance and Audit Gaps
Unverified Turnaround of Yitaiji
*ST Jintai’s acquisition of Shenzhen Yitaiji Tech Co., Ltd. has drawn regulatory attention. The company claims Yitaiji turned profitable in the first half of 2025, with net income of 962,800 yuan versus a loss of 6.57 million yuan a year prior. However, these figures lack audit verification for 2024 or 2025 reports. Liu’s 23 questions condemn management’s endorsement of this unaudited performance as irresponsible to shareholders. Given业绩对赌 (earnings commitment) arrangements, where promoters must compensate shareholders for shortfalls, *ST Jintai should maintain a cautious stance rather than prematurely vouching for Yitaiji’s results.
Regulatory Scrutiny and Future Risks
The Shanghai Securities Regulatory Bureau has queried the Yitaiji acquisition, with *ST Jintai’s audit committee suggesting the purchase might balance funds for non-operational occupancy entities. This admission implies the acquisition could be part of a broader scheme to mask fund misuse. As the company gears up for a temporary shareholders’ meeting on September 12, investors await concrete actions to address these governance risks and disclosure gaps.
Key Takeaways and Next Steps for Investors
The case of *ST Jintai underscores the importance of diligent scrutiny when investing in high-risk *ST stocks. Police involvement, unresolved fund occupancy, and accounting anomalies highlight severe governance risks. Investors should prioritize companies with transparent disclosures, robust internal controls, and coherent strategic narratives. For *ST Jintai, the upcoming shareholders’ meeting could be a turning point—either toward resolution or further turmoil. Stay informed by following regulatory updates and independent analyses to navigate these complex investment landscapes. Always consult financial advisors and diversify holdings to mitigate risks associated with speculative equities.
