IPO Observation | Eastech's IPO Challenges: Two Segments of Shareholding and Impact on Cash Flow
In recent years, the trend of green low-carbon production and living has become a social phenomenon, driven by rapid technological advancements. People's lives have been subtly changing as they increasingly adopt smart and efficient lifestyles. Against this backdrop, e-paper technology, which is environmentally friendly and has low carbon emissions, has attracted growing attention and recognition. This new technology has also spawned some companies that are planning to go public.
Eastech (600120) Electronics Co., Ltd. (hereinafter referred to as "Eastech") recently updated its IPO application review status and disclosed the first round of inquiry responses. The company plans to list on the Shanghai Stock Exchange's main board, with a total issue size not exceeding 1535.5713 million shares, and will use the funds raised to build an intelligent IoT e-paper production line and supplement working capital. The underwriter is Kangfu Securities (601211).
The Shanghai Stock Exchange's first round of inquiry responses required Eastech to explain, among other things, the company's shareholding structure, including the relationships between shareholders and the actual controllers. The exchange also asked about the existence or potential for illegal behavior related to shareholding.
Two Segments of Shareholding
According to Eastech's prospectus, the company was founded in October 2005 by Zhang Jingquan, who holds a 25% stake. In 2008, Zhang Jingquan transferred this 25% stake to his brother-in-law, Tan Hong, for a nominal price of CNY 1. Similarly, in 2008, Wang Aijun, the actual controller, transferred his 41% stake to Tan Hong for a total consideration of CNY 384 million.
Influence on Cash Flow
Eastech's financial performance has been uneven over the past three years. The company reported net cash inflows from operating activities of -CNY 1.64 billion, -CNY 1.38 billion, and CNY 6.649 million in 2020, 2021, and 2022, respectively. This suggests that Eastech's operating cash flow has been negative over the past three years.
The company's accounts receivable have also been a concern. As of the end of 2022, Eastech had CNY 2.41 billion in accounts receivable, with bad debts totaling CNY 2942.32 million.