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SFC commences proceedings against Tianhe Chemicals Group Limited and its executive director for defective prospectus and to seek compensation orders for investors

Issue date: 2020-09-07 17:17:28

The Securities and Futures Commission (SFC) has commenced proceedings in the Market Misconduct Tribunal (MMT) against Tianhe Chemicals Group Limited (Tianhe) and its executive director, Mr Wei Xuan, for allegedly issuing Tianhe’s listing prospectus in which the company’s revenue was overstated by over RMB6.7 billion (Notes 1 & 2).

The SFC is also seeking orders from the Court of First Instance under section 213 of the SFO to restore all public shareholders of the company to the position before their subscriptions or purchases of Tianhe’s shares.

Wei was also a substantial indirect shareholder and chief executive officer of Tianhe at the material time.

Tianhe issued the prospectus on 9 June 2014 for its initial public offering in Hong Kong and raised net proceeds of approximately HK$3.52 billion.

The SFC alleges that Tianhe’s prospectus contained materially false or misleading information regarding its sales revenue and profits for its track record period for the financial years from 2011 to 2013, which was likely to induce subscriptions for or purchases of the shares of Tianhe and/or to increase the share price of Tianhe in Hong Kong.

The SFC’s investigation revealed that about 53% of Tianhe’s total track record revenue of RMB12.6 billion disclosed in the prospectus was overstated.

The various orders sought by the SFC in proceedings under section 213 of the SFO include but not limited to an order directing Tianhe and Wei to restore all public shareholders who held the shares of Tianhe as at 2 June 2020 when the proceedings commenced to the position before their subscriptions or purchases of those shares by making restitutionary payments to the public shareholders or repurchasing the shares from the public shareholders, and/or an order to pay damages to the public shareholders.

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Notes:

1. The SFC instituted proceedings in the MMT against Tianhe and Wei for market misconduct under section 277 of the Securities and Futures Ordinance (SFO).  A copy of the SFC’s Notice of the MMT proceedings is available on the MMT’s website (www.mmt.gov.hk).
2. The SFC suspended the share trading of Tianhe on 25 May 2017 under Section 8 of the Securities and Futures (Stock Market Listing) Rules.  The shares of Tianhe were delisted by the Stock Exchange of Hong Kong Limited with effect from 11 June 2020.

Source: SFC