Pressure from Shareholders to Sell: Can Shangahmei Become a "Trap" for Hong Kong Stocks?

For many private equity funds, the biggest pressure at present is exiting their investments in projects, especially for funds that have already had their shares "frozen" and are now fully controlled by the government. This has led to some cases of hasty IPO applications.

The Shangahmei (Shanghai) Industrial Co., Ltd. case on February 14th is a typical example. The company even fired its core directors three months before submitting its IPO application, allegedly to conceal related-party transactions.

Meanwhile, the product quality control issues managed by Shangahmei's franchise stores have not been fully resolved, with numerous complaints from consumers on Sina Weibo's complaint platform about finding foreign objects in milk tea. These concerns have raised worries among Hong Kong investors that if Shangahmei goes public, it may dig a new pit for the already weakened Hong Kong market.

Multiple Cases of Shareholder-Freezing: Pressure to Exit

According to the prospectus, Shangahmei has introduced multiple shareholders, including Zhuhai Jinming Equity Investment Fund Partnership (hereinafter referred to as "Zhuhai Jinming") and Suzhou Yi Zhong Venture Capital Partnership (hereinafter referred to as "Suzhou Yi Zhong"), which hold significant stakes in the company. Before submitting its IPO application, Suzhou Yi Zhong's stake reached 7.76%, while Zhuhai Jinming's stake was 2.27%.

Both funds have experienced shareholder-share freezing phenomena, according to data from Ensher and other enterprise query software. Among them, Zhuhai Jinming's shareholders, including He Zhi Tao, have seen their shares frozen by courts in Beijing, Hangzhou, Suzhou, and Hunan Rucheng.

Given the pressure to exit, Zhuhai Jinming may sell a large amount of stocks after Shangahmei's listing ban period expires, completing its exit.

Suzhou Yi Zhong is facing similar pressure, with no listed or listed companies in its investment portfolio except for Shangahmei. Therefore, it also faces the pressure to exit.

Black Cat Complaints: Consumers Frequently Find Foreign Objects

If the company's performance continues to improve, PE investors may still be willing to take over even if they scale back their holdings. However, food safety issues have become a fatal risk for Shangahmei after its listing.

Therefore, Shangahmei has also taken measures online and offline to improve its product quality control. However, according to data from Sina Weibo's complaint platform, the number of complaints against Shangahmei has reached 2054, far exceeding that of Gudian Tea (1212) which filed for IPO around the same time.

The complaint data shows that product quality issues account for a high proportion. Among the over 60 complaints filed against Shangahmei this year, design food quality issues account for 22%.

This high ratio of quality complaints raises doubts about Shangahmei's ability to produce and control its products.

According to the prospectus, Shangahmei's revenue in the first three quarters of last year was only RMB 25.35 billion, much lower than that of Gudian Tea (RMB 55.71 billion) and Honey Ice City (RMB 154 billion). The single-store revenue of Shangahmei is RMB 34.74 million, far lower than that of the two companies.

This may be related to their higher quality complaints rate.

Another point is that the core director resigned just before the company's listing, avoiding the mandatory disclosure of related-party transactions. This has raised concerns about the authenticity of the company's financial reports.

According to business registration data, Yan Yiqing became Shangahmei's director as early as November 2020 and was a member of the three-person board of directors along with the company's founder, Dan Weiping, and Zhou Rongrong. However, he resigned just before the company's listing.

However, his shareholding ratio in Shanghai Yushuang Enterprise Management Partnership (Limited Partnership), which held 17.21% of Shangahmei shares, increased from 5.43% to 5.45% in February.

This change in shareholding and position suggests that Yan's resignation was not just a personnel change.

A search of business registration data found that Yan Yiqing held the same position as director at Ouzhak Food Co., Ltd. (hereinafter referred to as "Ouzhak Food"), while Suzhou Yi Zhong, one of Shangahmei's shareholders, was also a shareholder of Ouzhak Food.

Shangahmei's founder, Dan Weiping, held the same position at Shanghai Pongjin Enterprise Management Partnership (Limited Partnership), which was also a shareholder of Suzhou Yi Zhong. The two companies had previously collaborated on launching a milk tea product in 2022.

If Yan Yiqing still held his directorship when Shangahmei submitted its prospectus, it would have been required to disclose the related-party transactions between Shangahmei and Ouzhak Food. Moreover, since Shangahmei also sells milk tea products, there are concerns about potential competitive issues.

However, he chose to resign before submitting the prospectus, avoiding disclosure of these matters. Of course, this is just speculation, and Shangahmei has yet to respond to related questions.

This information alone can impact Shangahmei's stock price after listing. Only by openly and transparently disclosing all relevant information can investors have confidence in investing.