Family strife, Dongfang Fashion has changed its “principal” again: his ex-wife dismissed his brother, and the state-owned assets director abstained from voting

Photo source: Visual China

Blue Whale News, February 27 (Reporter Wang Jianwen)Just over a year after taking over the chairmanship of ST Dongshi (603377.SH, hereinafter referred to as Oriental Fashion) from his younger brother Xu Xiong, Xu Jinsong was forced to serve by other board members.

On the evening of February 26, Oriental Fashion announced that company directors Yan Wenhui, Sun Xiang, Wen Zijian and Wang Hongyu jointly proposed that during the tenure of current Chairman Xu Jinsong, the company’s operating conditions continued to deteriorate, internal management was chaotic, and strategic direction was unclear, which seriously affected the company’s normal operations and future development. Therefore, four directors decided to propose to remove Xu Jinsong from the position of chairman and elected Sun Xiang as the new chairman of the company.

It is worth noting that this forced palace incident centered on the Xu family. Sun Xiang, who was elected chairman this time, is the ex-wife of Xu Xiong, the real controller of Oriental fashion. In August 2012, Sun Xiang divorced Xu Xiong. Currently, Sun Xiang holds a 20% stake in Dongfang Investment, the controlling shareholder of the listed company, thereby indirectly holding shares in the listed company.

In September 2023, Xu Xiong, the real controller of Oriental Fashion, was arrested on suspicion of market manipulation, which directly led to the Xu family’s competition for the chairmanship of the world’s largest driving school. With Xu Xiong’s arrest, a series of illegal operations such as Xu Xiong concealing related transactions and embezzling assets through related parties gradually surfaced. In April 2024, due to the audit institution issuing the “Internal Control Audit Report” with negative opinions on the company’s 2023 annual report, the company’s stock was subject to other risk warnings.

On February 27, one trading day after the announcement of the new chairman was announced, Orient Fashion’s share price rose to a daily limit. At the close, the company’s share price closed at 2.31 yuan/share, with a total market value of approximately 1.7 billion yuan.

The ex-wife of the real controller forced the court to the brother of the real controller, and the director sent by Beijing State-owned Assets Bureau abstained from voting

The infighting on the board of directors of Oriental Fashion began on February 13. It was on this day that four directors Yan Wenhui, Sun Xiang, Wen Zijian and Wang Hongyu made proposals to Chairman Xu Jinsong. However, until February 22, Xu Jinsong had not yet convened a board meeting on this proposal.

In the absence of Chairman Xu Jinsong, on February 24, Yan Wenhui, the company’s vice chairman, presided over the board of directors, announced the removal of Xu Jinsong, and elected Xu Xiong’s ex-wife and company director Sun Xiang as the new chairman.

During this infighting on the board of directors of Oriental Fashion, two directors, Yang Xiaoteng and Wei Ran, abstained from voting.

Among them, Yang Xiaoteng’s reason for abstention was that the listed company’s 2023 internal control report had been issued with negative opinions and other risk warnings had been implemented. The matters involved had not made substantial progress yet. The company needed to complete the rectification as soon as possible and entered a stable state. Currently, it was impossible to remove the company’s board of directors. Chairman issued a conclusive opinion on the impact of the company. Wei Ran believes that based on the company’s current status, it is not yet possible to fully judge whether the removal of Xu Jinsong as chairman can solve the company’s current operating risks and delisting risks.

Currently, Oriental Fashion has a total of 11 board seats, including 7 non-independent directors and 4 independent directors. Among the non-independent directors, the two directors who abstained from voting this time, Yang Xiaoteng and Wei Ran both have Beijing state-owned background. Among them, Yang Xiaoteng has a background in Daxing state-owned assets, and Wei Ran has a background in BAIC Group. These are also the only two board seats in Beijing State-owned Assets Management. The remaining five directors, Yan Wenhui, Sun Xiang, Wen Zijian, Wang Hongyu and Xu Jinsong, are relatives of Xu Xiong or are from the management team of Oriental Fashion.

Beijing’s state-owned assets are white knights, and the controlling shareholder Dongfang Fashion Investment has not repaid the funds it has occupied.

This is not the first time that two directors with Beijing’s state-owned assets have abstained from voting.

Back in December 2019, BAIC Group acquired a 10.14% stake in Oriental Fashion at a price of 16.41 yuan/share through its private equity fund Xinyu Runfang, paying a total consideration of approximately 1 billion yuan, becoming the second largest shareholder of the listed company.

By 2020, Xu Xiong transferred 7.13% and 4.89% of the company’s shares to Huaneng Trust and Daxing Investment at a consideration of 780 million yuan and 602 million yuan respectively. Since then, Huaneng Trust and Daxing Investment have become the third and fifth largest shareholders of listed companies.

In June 2024, Daxing Investment and Huaneng Trust formed a concerted action relationship, with Daxing Investment in a leading position. After the signing of the concerted action agreement, Daxing Investment controlled a total of 12.02% of the voting rights of Oriental Fashion. The time when the two parties joined forces is at a critical period for Oriental Fashion to protect its shell. On June 25, 2024, Oriental Fashion’s share price closed at 0.99 yuan/share. Since then, the company’s share price has been below 1 yuan for four consecutive trading days. After Daxing Investment and Huaneng Trust formed a concerted action relationship, Dongfang Fashion’s share price closed at 1.01 yuan/share on July 2, after two consecutive days of daily trading, returning to the one-yuan line.

The admission of the white knight further changed the equity distribution pattern of Oriental Fashion. Judging from the 2024 third quarterly report, the controlling shareholder Oriental Fashion Investment holds 19.44% of the equity of Oriental Fashion, and Xu Xiong personally holds 6.9% of the equity of Oriental Fashion. The total is 26.34%. Xinyu Runfang, a subsidiary of BAIC, has a shareholding ratio of 10.14%. Huaneng Trust and Daxing State-owned Assets, acting in concert, jointly hold a 12.02% stake in Dongfang Fashion.

However, the shares of listed companies controlled by Xu Xiong are constantly decreasing due to judicial auctions, compulsory liquidation and other reasons, and more shares may be auctioned in the future. As of February 2025, Xu Xiong controls a total of 23.22% of the shares of listed companies. Among them, 6.90% of the shares of listed companies directly controlled by Xu Xiong have been frozen, and 8.48% of the remaining shares indirectly held through Oriental Fashion Investment have been frozen.

According to the Oriental Fashion announcement, from February 27 to March 19, 2025, 24.0105 million shares of the company held by Xu Xiong will be publicly auctioned. If the auction of the above shares is successful and the transfer procedures are completed, the number of shares of the listed company controlled by Xu Xiong will drop to 16.22%. Wind data shows that Oriental Fashion Investment’s shareholding in Oriental Fashion has dropped to 16.32%. It also means that the equity ratio of listed companies controlled by Xu Xiong and BAIC, Huaneng Trust and Daxing State-owned Assets, which act in concert, is gradually shrinking.

On the other hand, the announcement on January 24 showed that as of the end of November 2024, Dongfang Fashion Investment, the company’s controlling shareholder, and its related parties had used ST Dongshi funds for non-operating purposes through financial leasing and accounts receivable factoring business, with an estimated balance of 220 million yuan, and the above funds need to be collected within 6 months, otherwise the company will face the risk of delisting.

Based on the current total market value of 1.7 billion yuan, after the public auction, the corresponding market value of the number of shares of the listed company controlled by Xu Xiong is 276 million yuan, which is similar to the balance of occupied funds to be repaid.

Actively promoting shell protection is Sun Xiang’s top priority at the table.