Internet of Things chip manufacturer Tailingwei science and technology innovation board IPO suspended! Tracing the two major reasons behind it

Science and technology innovation board Daily, January 16th (Reporter Zhang Yinhai) Due to the fact that the actual controller still has a large amount of debt outstanding and the sales expense ratio is much higher than the industry average, the science and technology innovation board IPO of Internet of Things chip manufacturer Tailing Microelectronics (Shanghai) Co., Ltd. (hereinafter referred to as "Tailing Micro") was blocked, and the recent meeting of the Shanghai Municipal Committee decided to postpone the deliberation.

According to the company, the total realizable assets of the actual controller, Wang Weihang, and the cash inflow before the debt maturity date are expected to effectively cover the repayment amount of the loan principal and interest in each period, and the "old friend" provided Wang Weihang with 100 million yuan of ten-year interest-free credit loans.

However, from the breakdown of expenses, over 80% of the sales expenses of Tailingwei are employee salaries, and the average salary of overseas personnel is 1.47 times that of domestic employees.

Equity pledge approaches the warning line

At the 5th trial meeting in 2023 held on January 12th, members of the municipal party committee asked questions about Tailingwei and its sponsor representatives on the spot, including six questions, including the verification of the Memorandum of Cooperation and the operation in 2021.

Due to the fact that the actual controller still has a large amount of outstanding debts and the sales expense ratio is significantly higher than the industry average, the Shanghai Municipal Committee decided to suspend the consideration of Tailingwei science and technology innovation board IPO.

The science and technology innovation board Journal reporter noted that in the previous two rounds of inquiries, the above two major issues were focused on, but some of the contents were replied and verified or still not recognized by the regulatory authorities.

It is reported that in order to pay equity purchase money to Gao Peng, the original shareholder of Tailing Co., Ltd., and complete the demolition of the structured arrangement of Gao Peng, the original shareholder, Wang Weihang, the actual controller of the company, raised relevant funds by borrowing, resulting in a large debt. As of January 5, 2023, Wang Weihang had a loan balance of 185 million yuan through stock pledge and 332 million yuan from Shanghai Pudong Development Bank, with a total loan balance of 517 million yuan.

The relevant person in charge of Tailingwei told the reporter of science and technology innovation board Daily that,Wang Weihang’s total realizable assets and cash inflow before debt maturity are expected to effectively cover the repayment amount of loan principal and interest in each period, and large debts will not have a direct and significant adverse impact on the stability of company control..

In the reply to the inquiry, the company said that Wang Weihang would repay the debt by reducing the shares of Huasheng Tiancheng, personal salary, selling real estate and disposing of fund shares. According to its calculation, as of January 5, 58.22 million shares of Huasheng Tiancheng held by Wang Weihang (accounting for 5.31% of the total share capital) were worth 315 million yuan, the total value of four properties in Hainan and Beijing was about 150 million yuan, personal salary and dividends were about 18 million yuan, and the return on foreign investment was about 170 million yuan (including fund management fees and LP share value, etc.), totaling 653 million yuan.

However, due to the poor performance of Huasheng Tiancheng in recent years, its secondary market trend has also been sluggish. As of December 31, 2022, the performance guarantee ratio of Wang Weihang’s equity pledge business in Essence Securities was 152.45%, slightly higher than the early warning line of 150%.

In addition, Wang Weihang plans to reduce his holdings of Huasheng Tiancheng by no more than 14.56 million shares (about 1.33% of the company’s total share capital) through centralized bidding or block trading within six months from January 4, 2023. Once it starts to reduce its holdings, Huasheng Tiancheng’s share price will not only be under pressure, but also the shareholding ratio of Wang Weihang, the largest shareholder, will be reduced to less than 5%, and the ownership structure will be more dispersed.

It is noteworthy that an "old friend" of Wang Weihang provided him with 100 million yuan of interest-free ten-year credit loans.Among them, 35 million yuan is cash, and the rest is shares of listed companies with a value of not less than 65 million yuan. According to the company, the "old friend" and Wang Weihang are both members of the management team that founded Huasheng Tiancheng in 1998.

Deducted non-net profit decreased by 50% in 2022.

Compared with peers such as Hengxuan Technology, Broadcom Integration, Juxin Technology and Zhongke Lanxun, the sales expense ratio of Tailingwei and management fee rate are obviously higher. In particular, the sales expense ratio is much higher than that of peer companies.

"Because the company’s downstream application fields and product forms are rich, the direct sales model revenue accounts for a relatively high proportion, and overseas sales are carried out, the sales expense ratio is higher than the average of peer companies." Tailingwei replied to the reporter of science and technology innovation board Daily.

However, from the expense breakdown, the company’s employees’ salary accounts for more than 80% of the sales expenses, and there is a big difference between domestic and foreign employees’ salary. The data shows that by the end of 2021, there were 39 domestic salespeople in Tailingwei, with a per capita salary of 498,400 yuan. There are 18 overseas salespeople, with a per capita salary of 1,229,600 yuan, and the average salary of overseas personnel is 1.47 times that of domestic employees.

In this regard, the company said thatThe differences in sales staff’s working experience and rank, the difficulty in developing clients and clients, the income level at home and abroad and the cost of employment have led to a significantly higher average salary of overseas sales staff.

However, from the perspective of regional distribution of sales revenue and sales model, Tailingwei’s high overseas cost did not show its advantages. About 55% of the company’s revenue in the past three years has come from China, and the proportion of distribution revenue has increased to about 55%.

It should be noted that Tailingwei is mainly engaged in R&D, design and sales of wireless Internet of Things (IOT) in system on a chip, and nearly 85% of its revenue comes from the consumer electronics field. Affected by the slowdown in downstream market demand and other factors,The company’s performance in 2022 also dropped sharply. It is estimated that the revenue will reach 610 million yuan to 620 million yuan in 2022, down 6.09% to 4.55% year-on-year. Obtained a net profit of 33 million yuan to 36 million yuan, a year-on-year decrease of 55.74% to 51.71%.

For the decline in the performance of the first three quarters, the company said that it was mainly caused by factors such as the high base in the same period of last year, the industry boom in this period being less than expected, the increase in unit cost and the change in product sales structure. By the end of September 2022, the average selling price of the company’s IOT chip products was 1.8 yuan/chip, down 6.7% year-on-year. The sales volume was 224 million pieces, down 15.2% year-on-year.

"Although the company’s sub-sectors have been hit in the short term, they will still maintain a high degree of prosperity in the future." Tailing Micro told the reporter of science and technology innovation board Daily that the company’s current product strategy is based on a positive outlook for the future of Internet of Things applications, and strives for the first-Mover advantage for the explosive growth of one or several applications in the future.