Guangxi Fortune Technology Co. Ltd, a public company engaged in communications and information technology, is being questioned by the regulator for transferring its 100% stake for one yuan, Yicai.com reported.
The company said in an announcement that its wholly-owned subsidiary, Junyuan Property, transferred its 100% stake in Liaoyuan Property to Shenyang Hualing, a Shenyang-based real estate company, for the price of 1 yuan.
The target company, Liaoyuan Property, is said to be on the verge of insolvency due to increasing labor costs and the increasing difficulty of collecting management fees. After the transaction, it is expected to have a disposal income of about 12 million yuan, according to the company’s annual report.
The Shanghai Stock Exchange soon sent an inquiry letter, asking the company to further disclose whether there is a trading motivation for avoiding continuous losses through the proceeds of asset disposal.
The company is also being asked to explain the necessity and commercial rationality of the transfer, as well as the negotiated basis and fairness of the price.
The parent company suffered from losses of 26.5 million yuan and 9.7 million yuan during the first three quarters of 2016 and 2017, respectively.