Chapter 631
Debate
Chapter 631 Debate (4k)
The listing of Silicon Carbon Group has attracted much attention, so the list of members of the Hong Kong Stock Exchange's Listing Committee is also quite prestigious.
The hearing was chaired by Chan Mo-yin, former Executive Director of the Corporate Finance Department of the Hong Kong Securities and Futures Commission. Also present as a regulator and independent professional were Lee Wai-ming, former Commissioner of Banking Supervision of the Hong Kong Monetary Authority, and Cheung Man-yee, a professor at the Faculty of Law of the University of Hong Kong, who studies the information disclosure system of the securities market.
There's also Huang Zhihui, who participated in the revision of the listing rules for the Hong Kong Stock Exchange's GEM board and is skilled in the supervision of special entities listing.
The exposure of Guo Shanfeng's identity and the hasty transfer of the Silicon Carbon Group from the US to Hong Kong inevitably led to controversy surrounding the group's procedures. Therefore, Yu Xing did not engage in any other activities upon arriving here, but only handled work at the hotel, also to avoid suspicion.
However, today, Morgan Stanley's Cheng Wing-yee preemptively questioned the assembled committee members, diminishing the authority of the process and the prestige of the committee members, and revealing the underlying interests.
After giving Zheng Yongyi a clear warning, Chen Muxian looked around at the committee members present and emphasized: "Welcome everyone to this hearing. We are here to review the application for listing on the GEM board of Silicon Carbon Group. The key focus is on the compliance handling of the short-selling background of the founder, Mr. Yu Xing."
He emphasized "compliance" in "Silicon Carbon Group" and added: "This listing hearing has attracted much attention in Hong Kong. We must live up to expectations. First, please have the sponsor briefly state the core application logic."
Huang Guobin of Goldman Sachs nodded and said, "The core business of Silicon Carbon Group is the research, development, production and sales of new energy passenger vehicles, and it already has a complete production line and order backlog."
He paused, then answered against his conscience: "Regarding the short-selling background of founder Mr. Yu Xing, we have completed three core tasks. First, we have verified that his past short-selling transactions comply with the regulatory rules of major global markets and have no record of violations. Second, we have established a strict mechanism for the isolation of funds, decision-making, and information, ensuring that the short-selling business is completely independent of the car company. Third, Mr. Yu Xing has issued a written commitment to establish a firewall mechanism to isolate conflicts of interest after the listing. The prospectus has fully disclosed the relevant risks and is submitted to the committee for review."
One of the committee members, Zhou Junhao, is an independent lawyer and a former judge of the Commercial Division of the Hong Kong High Court. He immediately asked in response to this question: "Mr. Huang, has Goldman Sachs' due diligence on Mr. Yu's transactions been approved by regulators in major global markets? As far as I know, there are ongoing investigations into Mr. Yu and Guo Shanfeng in Japan, Europe, and the United States. Do they also agree with Goldman Sachs' assessment?"
Sponsor Huang Guobin was well-prepared for such a question and immediately replied: "Thank you for your question, Mr. Zhou. We will answer this question from three aspects, taking into account the rules of the Hong Kong Stock Exchange, local laws in Hong Kong, and regulatory practices in Europe and the United States. The most important thing is that we should not presume risks based on incomplete investigations."
"According to Articles 11.06 and 13.09 of the 'Listing Rules' of the Growth Enterprise Market, the listing review is based on existing verifiable legal conclusions. The investigations in Europe and the United States have been protracted, and there is currently no indication that Mr. Yu will be punished."
"According to the principle of 'presumption of no fault' in Section 38 of the Hong Kong Securities and Futures Ordinance, no entity may be presumed to have committed any violation before the regulatory authority issues a formal penalty decision."
"Based on regulatory practices in Europe and the United States, over 60% of such investigations end with a conclusion of 'no violation' or 'minor rectification.' We have fully disclosed this investigation in our prospectus. Furthermore, Mr. Yu Xing has made a commitment that if we receive regulatory penalties in the future, he will bear full responsibility with his personal assets, without any connection to the listed company, thus completely isolating us from potential risks. In conclusion, there is currently no legal basis to prove that this investigation constitutes a substantial risk, and it should not be used to deny our listing eligibility."
Huang Guobin's words were rather tactful, and were based on the various clauses, but in plain terms, Yu Xing could personally compensate, and might not even need to.
Zhou Junhao turned his gaze to Yu Xing, the person involved: "Mr. Yu, assuming you face severe penalties, are your personal assets sufficient to cover all the responsibilities?"
Yu Xing nodded slightly: "Personal assets can bear full responsibility. Just as Mr. Huang said, the supervision and litigation in this regard have nothing to do with the Silicon Carbon Group."
Zhou Junhao pressed on relentlessly, "Mr. Yu, a class-action lawsuit has been launched against you in Europe, demanding 50 billion euros in damages. This makes me suspect that your stake in Silicon Carbon Group will be affected by a series of lawsuits in the future."
“I have noticed the class-action lawsuit, but my personal lawyer, the company’s legal counsel, and European law firms all believe it is extremely unreasonable,” Yu Xing said calmly. “Committee Member Zhou, you may have doubts, but at this stage, such doubts should not negate the listing qualifications of Silicon Carbon Group.”
From the start of the hearing until now, Yu Xing has been sizing up the committee members present, and the committee members are also sizing up the legendary short-selling king.
Some people nodded to each other when their eyes met, while others quickly looked away. Still others, like Zhou Junhao who kept asking questions, had a hint of provocation in their eyes.
The title "King of Short Sellers" is just a nickname. He may have a huge influence in a certain field, but not everyone will be convinced of his authority, especially in Hong Kong, where there is a mixed bag of people.
Seeing that Zhou Junhao did not ask any further questions, Li Weiming, one of the committee members, brought up the firewall mechanism that the sponsor had just answered and asked Yu Xing: "Mr. Yu, Mr. Huang just mentioned the firewall mechanism for short selling. Could you please explain how it prevents you from using undisclosed information from the Silicon Carbon Group to short sell?"
Yu Xing didn't understand the question at first: "Undisclosed information from Silicon Carbon Group?"
Li Weiming explained, "Yes, for example, if there is negative information such as the silicon carbon group's production capacity not meeting standards and order decline, how can you ensure that you are not informed in advance and do not engage in related transactions?"
Yu Xing and Huang Guobin exchanged a glance, then said with a wry smile, "You mean, I might use negative information about Silicon Carbon Group to short-sell Silicon Carbon Group? I'd short-sell myself?"
Li Weiming insisted, "Yes, Mr. Yu, you should be familiar with this. Martin Winterkorn, as the CEO of Volkswagen Group, also launched a short-selling attack on Volkswagen using undisclosed information. This has already happened."
Yu Xing: "..."
He had to admit: "This question is unexpected and does not make sense. As a major shareholder of Silicon Carbon Group, shorting Silicon Carbon would obviously harm my own interests. Martin was just a CEO of Volkswagen, but I am the founder of Silicon Carbon Group."
"So, Mr. Yu, your so-called 'firewall' cannot prevent you from shorting Silicon Carbon Group in terms of mechanism, right?" Li Weiming made this clear.
This mechanism indeed lacks such a feature; it primarily focuses on the public disclosure of financial operations at the mountain peak. It's said that sensitive information within the Silicon Carbon Group is kept private by Yu Xing, who serves as Chairman and CEO…
From a purely logical standpoint, short sellers are ruthless and capable of anything, even harming themselves when they get vicious, as evidenced by the example of the Volkswagen CEO.
“The logic of this question seems perfect.” Yu Xing shook his head, and could only answer the other party’s follow-up question in a different way, “but it does not conform to the reality, Mr. Li. This question has made me look at the Hong Kong Monetary Authority in a new light.”
Li Weiming is a former supervisory officer of the Hong Kong Monetary Authority.
Yu Xing is facing unreasonable questions, but he doesn't intend to keep making submissive excuses. Today's listing hearing is the final vote; if he doesn't get this vote, so be it. Even if he ends up with zero votes in favor of the listing, he can simply go back to Lingang and continue running his own business.
Seeing that Yu Xing was no longer being polite, Li Weiming said directly, "This is just a logical verification that there are problems with the firewall. Mr. Yu, from a realistic point of view, you are the one who deserves everyone's attention. If we consider the reality, do you think we should trust Shanfeng's subsequent compliant operations?"
“Of course we should believe it.” Yu Xing nodded. “Regarding the actual situation of Guoshanfeng, its research has uncovered major problems of listed companies that have been overlooked by regulatory authorities in different regions. As of today, all of its research reports have been confirmed, and the non-compliance issues it has raised are still just hypotheses in the investigation.”
"Is it reasonable for you to use a hypothetical question to evaluate the proven supplementary regulatory role of mountain peaks?"
Li Weiming raised his voice: "When the U.S. SEC asked Guoshanfeng to reveal the identity of its actual controller, you did not reveal your identity, nor did you disclose the relevant short positions. This is not a hypothetical issue."
Yu Xing bluntly replied, "That's because the US SEC's requirements are not compliant! My positions did not meet the disclosure requirements, so I don't need to disclose them!"
Li Weiming laughed angrily: "The SEC's requirements are not compliant?"
“If it believes I have violated its compliance requirements and imposes penalties accordingly, then I will naturally file a lawsuit. Before that, my team and I believe that it is not a compliance requirement,” Yu Xing stated definitively. “Whether it is the SEC or ESMA, their requirements must be legal and must comply with procedures.”
The chairman of the IPO company and the hearing committee members got into a heated argument in public.
This is not common.
But considering Mr. Yu's identity, he is a major short seller, and it's not too surprising that he's being investigated by the SEC and ESMA.
Li Weiming was not convinced: "Mr. Yu, given your short-selling activities, your actions during your visit to Hong Kong, and the impact you have had on the financial market, I do not believe that Silicon Carbon Group should pass this listing application."
Yu Xing knew he was referring to the impact of the interview and asked directly, "Am I not allowed to discuss competitive changes in a certain business sector? Is it my few words that caused the impact, or have existing business conditions been brought to the forefront by everyone?"
At this point, Morgan Stanley's Zheng Yongyi, who had tried to take advantage of the situation from the start, seized the opportunity: "Mr. Yu, I think you can talk about this, but your vague talk has a negative impact. For example, in the SaaS field, there are four major listed companies. You should consider your identity and influence. If you do have research conclusions based on publicly available information, then you should talk about this in a targeted rather than general way."
Sponsor Huang Guobin suddenly spoke out: "I protest. I believe that it is seriously inconsistent with the listing hearing process for Committee Member Li Weiming to make a 'disapproval' judgment at this stage."
According to normal procedures, the vote should take place after the hearing and question-and-answer session, followed by a closed-door deliberation, at which time an independent and confidential on-site vote will be held.
Li Weiming immediately defended himself: "I did not conduct the final vote; I was just giving my personal judgment based on the current performance."
As the hearing was being conducted, Chan Mo-yin, who was presiding over the hearing, listened to the back-and-forth questions and answers, and his head began to throb.
He couldn't help but tap the table: "Quiet, quiet. I need to remind all the committee members and Silicon Carbon Group that we are here to discuss the Silicon Carbon IPO application hearing, not anything else."
Discussing the silicon carbon group inevitably leads to discussing Yu Xing, discussing Yu Xing inevitably leads to discussing Guo Shanfeng, and discussing Guo Shanfeng... that would easily involve many other issues.
“Then I’d like to ask a question about Silicon Carbon Group.” Wu Zhiqiang, Secretary-General of the Hong Kong Automobile Industry Association, mentioned Silicon Carbon Group, which gave the committee members present a slightly strange feeling.
Indeed, it is the IPO of Silicon Carbon Group after all, yet there has not been a single inquiry about it until now.
When Wu Zhiqiang saw Mr. Yu looking over, he asked, "Carbon Silicon Group received strong subsidies from the mainland in 2015, but this policy has been significantly reduced this year. The subsidies will be further reduced next year, the year after, and in the foreseeable future. At the same time, there is a lot of controversy in the industry about the transitional nature of range-extending technology."
“Range-extended electric vehicles still rely on fuel in essence, and their energy conversion efficiency is lower than that of plug-in hybrids. Does this technology choice pose a significant risk for a new energy vehicle company?”
“I don’t know how the controversy in the industry came to the conclusion that it is ‘very large’,” Yu Xing said. “The controversy I’ve heard in the industry is about whether Silicon Carbon Group can achieve sales of 10 or 12 units in 2016 when subsidies were phased out.”
"BMW has also launched models with range-extending technology in the past two years, but due to its strategic focus, there are significant problems. This proves from the side that range-extending technology in the new energy era can better meet user needs."
“The coverage rate of charging facilities in mainland China is less than 30%, and the charging difficulties are even more prominent in third- and fourth-tier cities. Range-extended vehicles are the more market-acceptable solution at this stage.”
“The Silicon Carbon Group has made preparations for technological iteration and policy adaptation. In response to policy uncertainties, we have actually reached comprehensive cooperation with local governments, rather than relying solely on cash subsidies. These are also explained in detail in the prospectus.”
Yu Xing then turned his gaze to another committee member and asked, "I believe Committee Member Chen has a better understanding of the authenticity of market business. New energy vehicles are different from fuel vehicles; this is a new stage of industrial transformation and rapid development."
Committee member Chen Siyuan immediately agreed, saying, "Mr. Yu's answer convinces me. Whether it's range-extended or hybrid, a good product is one that consumers choose. Silicon Carbon Group's Q1 production capacity has already been covered by orders, and its sales this year have been supported by stable growth. I support Silicon Carbon Group's application to list on the Hong Kong Growth Enterprise Market."
Hearing such unwavering support, the other committee members cursed inwardly. Chen Siyuan was the general manager of BYD's Hong Kong branch; it seemed that mainland automakers were now all in cahoots.
Chen Siyuan was very open in the face of others' gazes. Of course, a group of outsiders didn't know the true value of the Silicon Carbon Group's sales figures last year. They could leave the discussion of short sellers aside, but discussing the Silicon Carbon Group's sales figures and future prospects was the most professional and independent opinion.
(End of this chapter)