IPO Observation: Family-owned company with over 80% shares, establishes patents after 10 years of research and development
A Chinese IPO again features a family-owned company. In June last year, Shenzhen-based Direction Electronics Co., Ltd. (hereinafter referred to as Direction Electronics), controlled by brothers Wang Conghui and Wang Congzhong, submitted an IPO application to the Shanghai Stock Exchange, which was approved. To date, Direction Electronics has responded to its second round of questionnaires. Behind this, we need to note that Wang Conghui and Wang Congzhong directly or indirectly hold over 80% shares in the company. As a high-tech enterprise, Direction Electronics has not obtained any patents after its establishment for more than 10 years, while inventing patents and other types of patents have "concentrated" in the reporting period. However, its research and development expenses are significantly lower than those of comparable listed companies. Moreover, it is worth noting that before submitting its IPO application, the controlling shareholder Wang Conghui's daughter, Wang Mei'shan, purchased 2.8 million shares at a price of RMB1 per share, while three other shareholders entered the market with prices exceeding RMB14 per share, with a significant difference between the two. Established over 10 years without patents According to the prospectus, Direction Electronics was established on September 15, 2003, and its shares were listed on December 4, 2020. The company specializes in researching, developing, and selling high-precision connectors for clients, providing complete and reliable communication solutions. The company's main products include communication connectors and industrial connectors, which can be widely applied to data centers, servers, commercial switching devices, communication bases, routers, and other systems and terminals. However, after its establishment for more than 10 years, Direction Electronics has not obtained any patents. As of November 30, 2023, the company has obtained 99 domestic patents, all of which are original, with 12 invention patents, 84 utility model patents, and 3 design patents. Surprisingly, inventing patents were concentrated in the reporting period In addition, during the reporting period, Direction Electronics' research and development expenses have been significantly lower than those of comparable listed companies. According to the prospectus, the company's research and development expenses for 2022, 2021, 2020, and 2019 were RMB55 million, RMB44 million, RMB41 million, and RMB35 million, respectively, which is significantly lower than the average of comparable listed companies. Family color The controlling shareholder Wang Conghui and his brothers have a family-run business with more than 80% shares in Direction Electronics. As of the date of this prospectus (the latest version), they are the company's controlling shareholders and actual controllers.
Family color prominent, total shares over 80%
Controlling shareholder's daughter purchases shares at RMB1 per share
Purchase price significantly lower than that of other shareholders
The controlling shareholder Wang Conghui and his brothers have a family-run business with more than 80% shares in Direction Electronics. As of the date of this prospectus (the latest version), they are the company's controlling shareholders and actual controllers.
It is worth noting that after Wang Mei'shan, the controlling shareholder's daughter, became a shareholder of Direction Electronics, the company held its first extraordinary shareholders' meeting on December 8, 2022, and approved several resolutions, including the proposal to increase capital by RMB7.0 billion through the issuance of new shares at RMB14.73 per share.
As of December 23, 2022, Direction Electronics has completed the registration procedures for its increased capital with the Shenzhen City Administration Bureau.