Oriental Ocean, a seafood firm that has had several run-ins with Chinese regulatory authorities in recent times, is facing a fresh financial scandal, as a prospective investor has been accused of insider trading in the company.
A CNY 30,000 (USD 4,200, EUR 3,900) fine has been levied against Zhu Xuemei, a businessman who tried to invest in Oriental Ocean after it bought the company he worked for. The company for which Xuemei worked, Xin Hong Medical Treatment, had agreed to be acquired by Oriental Ocean and Xuemei was in the midst of negotiations over a buyout when he purchased 40,000 in the Shandong-based company. That move was illegal under stock market rules on insider trading during “sensitive periods” during which major developments are underway that would impact the price of a stock.
Due to this violation and several previous issues, Oriental Ocean is now in the sights of securities regulators tasked with delisting non-performing stocks. Oriental Ocean has gotten two warnings from the regulators over the past 36 months, according to the China Securities Regulatory Commission. The receipt of three such warnings over the three-year time frame – or consecutive losses in that time – are grounds for delisting, according to China’s securities law.
Earlier this year, the Shenzhen Stock Exchange issued a criticism of Che Dong, Oriental Ocean’s chairman and CEO, for the questionable timing of his sale of company shares.
Separately, a Shanghai law firm is considering bringing suit against Oriental Ocean, which shocked investors when it announced a loss of CNY 553 million (USD 77.4 million, EUR 71.8 million) for 2019. The company’s revenue was down 16.4 percent to CNY 600 million (USD 84 million, EUR 78 million), despite forecasting a profit earlier this year. The company is blaming the loss on a new accounting process for its sea cucumber production. In a repeat of a similar move by disgruntled investors against scallop specialist firm Zoneco, which also produces sea cucumbers, over the past year, the Shanghai-based Minglun Law Co has invited investors to contact it with a view to taking a case against Oriental Ocean for harming investors’ economic interests.
As a result of the turmoil, Shandong Oriental Ocean stock was trading at CNY 2.08 (USD 0.28, EUR 0.27) on 15 April, compared to CNY 6.45 (USD 0.90, EUR 0.83) on the same date in 2019.
Recent news has not all been bad for Oriental Ocean. In February, Oriental Ocean announced it had received CNY 226 million (USD 31.6 million, EUR 29.3 million) for land and “salmon-raising facilities” it had previously operated in the Dajijia industrial zone, located near the city of Yantai, on China’s east coast. The buyer was revealed to be a new joint venture controlled by state-owned behemoth Qingdao Guoxin Development (Group) Co., Ltd. The new firm operating the JV, Qingdao Guoxin Oriental Recirculation Aquaculture Co, is 70 percent controlled by Guoxin, with Oriental Ocean holding the remaining 30 percent stake through a subsidiary.
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