China Nuclear Titanium Dioxide Co., Ltd. (China Nuclear Titanium Dioxide), the actual controller was fined 133 million yuan for illegally reducing the company’s stock to cash out approximately 671 million yuan. Along with the fine, friends who participated in the stock reduction were also penalized.
The China Securities Regulatory Commission’s administrative penalty decision on April 30, in the “Decision on Administrative Penalties by China Securities Regulatory Commission (Wang Zelong, Hong Haowei, CITIC Securities, CITIC Securities, Haitong Securities, Han Yuchen)” revealed that in July 2022, China Nuclear Titanium Dioxide’s non-public issuance of A-shares was approved after auditing. From July to August 2022, CITIC Securities recommended to Wang Zelong, the actual controller of China Nuclear Titanium Dioxide, an increase and decrease plan through off-market derivative trading platforms.
In September 2022, Wang Zelong decided to implement the increase and decrease plan, and former secretary of the board of directors of China Nuclear Titanium Dioxide, Han Yuchen, executed the plan, responsible for liaising with CITIC Securities and CITIC Securities.
Between September 2022 and February 2023, Wang Zelong, Han Yuchen, CITIC Securities, and CITIC Securities collectively discussed and implemented short-selling arbitrage involving 88 million shares of China Nuclear Titanium Dioxide’s stock. In addition, CITIC Securities and Haitong Securities communicated in November 2022 on a profit swap business related to the non-public issuance of China Nuclear Titanium Dioxide’s stock.
In February 2023, Haitong Securities participated in the first round of quotes for the non-public issuance of China Nuclear Titanium Dioxide and determined the issuance price. Subsequently, Haitong Securities signed multiple profit swap agreements related to China Nuclear Titanium Dioxide’s stock with CITIC Securities and others.
From February 13 to February 21, four private equity fund product accounts short-sold 88 million shares of China Nuclear Titanium Dioxide’s stock, with an average sell price of approximately 7.63 yuan per share, totaling about 671 million yuan.
Wang Zelong did not disclose his actual participation in the non-public issuance through the aforementioned trading arrangements to the listed company. On February 24 and March 3, China Nuclear Titanium Dioxide announced a report on the relevant issuance situation of the non-public issuance of A-shares, stating that there was no situation where the actual controller of the issuer directly or indirectly participated in the subscription of this issuance. This led to false statements in the company’s announcement.
The administrative penalty decision stated that by violating restrictive regulations on transferring China Nuclear Titanium Dioxide’s non-public issuance shares in 2023, arranging through derivative trading, selling short at market prices, locking in profits from the price difference between the non-public issuance shares and the discount price, thereby evading lock-up period requirements, and violating provisions of the Securities Law and other regulations. Furthermore, Wang Zelong was also found to have engaged in illegal acts such as information disclosure violations.
China Nuclear Titanium Dioxide’s actual controller, Wang Zelong, and friends Hong Haowei, former board secretary Han Yuchen, CITIC Securities, Haitong Securities, and CITIC Securities were collectively fined a total of 235 million yuan, with Wang Zelong receiving a fine of 133 million yuan.
Public records show that Wang Zelong was born in 1996 in Jieyang City, Guangdong Province, and at the age of 28, he graduated from the Beijing Film Academy.
According to information from “Nanfang Daily,” in 2015, shortly after coming of age, Wang Zelong subscribed 530 million shares of the proposed issuance of the TiO2 powder production company Longbai Group for a total of 1.431 billion yuan. After the lock-up period expired, he made over a billion yuan through four rounds of cash-out reductions.
In April 2021, Forbes released the list of the youngest billionaires in 2021, with Wang Zelong ranking second with a net worth of 15 billion U.S. dollars (equivalent to 108 billion yuan). On March 25, 2024, the Hurun Research Institute published the “2024 Hurun Global Rich List,” with Wang Zelong ranking 3058th on the list with a net worth of 7.2 billion yuan.
In the A-share market in mainland China, instances of irregular stock reductions due to vested interests are not uncommon. The Chinese authorities generally settle such cases with fines, but the lower fine amounts often lead to recurring incidents of irregular cash-outs. The disclosure of this incident has sparked discussions among netizens.
User “0rl6161” from Tencent remarked: “Violate the rules – fine! – Violate again – fine again! – Keep violating, keep fining! To put an end to this cycle, a substantial fine should be imposed at once!”
Other netizens indicated that securities firms and shareholders engaging in stock reductions collude together in exploiting retail investors. User “Shugen” commented: “This is a common practice of major shareholders colluding with securities firms. CITIC Securities is a leading state-owned securities firm, but they also engage in such dirty practices. Establish a special investigation team and investigate for twenty years to recover illegally obtained funds from major shareholders and financial institutions to reinvest in the stock market.”
“Mr. Chen” stated: “Stockholders, wake up! Even large companies like CITIC Securities are colluding in joint harvesting. What’s the point of trading stocks openly? Wash up and sleep, or you might end up bankrupt in the end.”
“Sky Blue” questioned the regulatory authorities: “Why hasn’t the institutions prohibited institutions from combining daily margin trading to profit, why haven’t they prohibited it?”