Recently, Baosheng (stock code: 600973) released an announcement about its involvement in litigation, revealing the complex legal challenges facing the company.
The content of the announcement pointed out that due to the failure of Shenzhen Evergrande Group Data Equipment Company Limited and its affiliates to pay the payment for the wire and cable goods on time, in order to safeguard the legitimate rights and interests of the company and its shareholders, Baosheng filed four civil lawsuits in August 2021 with Guangzhou Intermediate People's Court. The lawsuits demanded that the defendants pay a total of 712 million yuan of payment for goods and liquidated damages, involving amounts of 283 million yuan, 188 million yuan, 157 million yuan and 84.4784 million yuan, respectively. Baosheng shares as the plaintiff, while Shenzhen Evergrande Data Equipment Company, Guangzhou Evergrande Data Equipment Company, Evergrande Real Estate Group, Evergrande Children's World Group, Evergrande Group and many other companies became the defendants.
In the litigation statement, Baosheng emphasized that the defendant owed a huge amount of payment for the goods and the commercial promissory note provided could not be honored upon expiration, and the company had sufficient reasons to judge that the defendant was unable and had no intention to perform the matured and unmatured debts.
Baosheng shares also revealed that Shenzhen Evergrande data equipment company and related enterprises and the guarantee party has provided the company with real estate guarantee worth about 283 million yuan for the above payment of goods, and promised to Guiyang Evergrande Central Plaza and other projects sales return as a source of repayment, the current pawn guarantee procedures are being processed.
As the case has not yet commenced and the outcome of the litigation is uncertain, it is not yet possible to predict its impact on the Company's earnings for the current period or future earnings.
Baosheng, a listed company based in Yangzhou, mainly deals in wire and cable, bare conductor and other products, with a current market capitalization of about 6.3 billion yuan. Evergrande Group has been an important customer of Baosheng, and the two companies have had business dealings since 2010.In March 2017, Baosheng signed a strategic cooperation agreement with Evergrande Real Estate.
Data show that in 2019, Baosheng shares of Guangzhou Evergrande Data Equipment Company and Shenzhen Evergrande Data Equipment Company's accounts receivable balance of 408 million yuan and 190 million yuan, respectively, involved in the business for the sale of wire and cable, these two companies this time are Baosheng shares sued.
In the reply to the SSE's regulatory inquiry letter on the disclosure of information in the 2019 annual report, Baosheng pointed out that "in the cable business, Evergrande System Company and Hengli (Note: 'Hengli' in the original text of the announcement should be an error) are the company's large customers in the wire and cable business, and their total supplier tickets in 2019 amounted to respectively 620 million yuan and 160 million yuan."
Baosheng said at that time: "There are more strict risk control measures for the collection of commercial promissory notes, and will judge whether to collect commercial promissory notes according to the credit status of customers. The creditworthiness of such companies is high, the payback situation is good, and the commercial promissory notes paid in the past years have not been overdue and unable to be honored, so the Company believes that there is no risk of recovery of the commercial promissory notes collected."
Data show that in the first half of this year, Baosheng shares realized operating income of 20.588 billion yuan, an increase of 29.15%; net profit attributable to the parent company was 193 million yuan, an increase of 46.47%. As of the end of June, Baosheng shares notes receivable amounted to 3.005 billion yuan, including 2.593 billion yuan of commercial paper.
It is worth noting that on the evening of September 6, three trees replied to the SEC verification letter shows that its holdings of Evergrande and its companies also have notes overdue.
