What's wrong with me being a rich man?

Chapter 622 What is the King of Short Sellers? (7K)

Yu Xing made his first public appearance as Guo Shanfeng and was surprised to receive such enthusiastic applause.

His hand rested on the microphone, and he hesitated for a moment.

As the applause subsided, Yu Xing composed himself and was about to speak when he heard a lot of boos, which instantly put him at ease.

That's right, that's right.

Cui Zhiyu, who was sitting next to him, had just breathed a sigh of relief when he heard the applause, but now, hearing the boos all around him, he suddenly became even more nervous than before. A thought involuntarily surfaced in his mind: if the crowd suddenly rushed at him, he and President Yu probably wouldn't be able to return to Lingang.

Fortunately, there was no rush to attack; instead, there was only a prolonged chorus of boos.

The applause was enthusiastic but brief, while the boos were sporadic but persistent.

Yu Xing waited for about ten seconds, and when he saw that there were still boos, he took a sip of tea to moisten his throat and put the prospectus of the Silicon Carbon Group on the screen behind him.

Although everyone jokingly called it a meeting of the king of short sellers, he, the real person, could not forget about the company's listing. Silicon Carbon Group submitted the first version of its prospectus to the Hong Kong Stock Exchange last month, and the second version of the prospectus, which was resubmitted after communication, appeared in the way it is today.

—Silicate Carbon Group was founded in 2011 and launched China's first range-extended luxury SUV in February 2015. With its full range of technology, it defined the high-end new energy market and achieved sales of 82,500 units throughout the year. It ranked among the top three in sales of mid-to-large SUVs in China for eight consecutive months, with the highest monthly sales exceeding 13,000 units.

—In 2015, Silicon Carbon Group achieved revenue of HK$247.3 billion, with a net loss of HK$1.92 million and a gross profit margin of 13.5%.

——截至2015年12月31日，碳硅集团在全国拥有71家直营门店，在建门店26家，计划2016年扩张至150家直营门店，覆盖国内80个城市。

—The first production base of the Silicon Carbon Group is the Lingang Phase I plant, with an annual production capacity of 100,000 vehicles. The Phase II plant, which is under construction, is adjacent to the Phase I plant and is scheduled to be put into production in May 2016, with a planned annual production capacity of 120,000 vehicles. The Group has signed a strategic cooperation memorandum with Ningbo, Zhejiang Province, to jointly build a second production base, focusing on the next generation of new models, reserving capacity flexibility for a multi-model strategy, and deepening supply chain collaboration in the Yangtze River Delta.

The official prospectus of Silicon Carbon Group is 623 pages long, covering various information disclosures such as technology, market, outlook, risks, finance, shareholders, and contracts. However, it is impossible to show everything to the media, so only a summary of the key points can be provided.

Previously, Yu Xing planned to push silicon carbon to list in the United States, but he disagreed with Goldman Sachs on the valuation, believing that the reasonable range was US$100-120 billion. Now, he has to make some concessions when he moves to Hong Kong.

Therefore, the initial public offering size of Silicon Carbon Group's Hong Kong IPO is 90 million shares, raising a total of US$1.8 billion, corresponding to a post-investment valuation of US$0.18 billion, with a 20% equity stake offered. The offering structure is divided into a public offering of 18 million shares in Hong Kong and an international offering of 1.62 million shares, with a clawback mechanism triggered by oversubscription.

The underwriters have an over-allotment option of 15% of the initial offering size, commonly known as the greenshoe option, which corresponds to the issuance of an additional 2.7 million shares and potential additional financing of US$0.27 million. After the greenshoe option is fully exercised, the total offering size will reach 2.07 million shares, with a total financing amount of US$20.7 billion, and the equity stake will be diluted to 22.33%.

As for the final scale, it depends on the roadshow results.

The arrival of Silicon Carbon Group in Hong Kong this time has brought uncertainty, not only due to the recent revelation of its founder Yu Xing's identity as a short-selling king, but also due to the controversy surrounding its hasty arrival at the Hong Kong Stock Exchange.

Kyushu went public in 2015, and its prospectus naturally focused on the revenue of that year. However, the Hong Kong Stock Exchange Main Board requires at least three fiscal years of operating records, which must be provided by the company's main business. The GEM Board lowers the requirements to two fiscal years.

The prospectus submitted by Silicon Carbon Group uses the patent licensing fees of 2014 as the first fiscal year's operating record, followed by the automobile sales of 2015, which naturally means that it can only be listed on the ChiNext board.

The Hong Kong Stock Exchange has raised concerns about the differences between the business models for patent licensing in 2014 and vehicle sales in 2015, and further communication on the process is needed.

This is a mandatory requirement for Hong Kong to go public.

Overall, the breakthrough achievements of Silicon Carbon Group in the Chinese market last year have been quite impressive in terms of financial indicators. Although there are losses, with the steady growth in sales and the cost reduction brought about by economies of scale, it is foreseeable that the company will turn a profit.

If Silicon Carbon Group can be listed in Hong Kong, it means that it will quickly transfer to the main board after meeting the three-year hard threshold.

As the prospectus appeared on the screen in the lobby, the boos finally subsided, and it seemed to remind many people that this was indeed the founder of a company preparing for an IPO in Hong Kong.

"The performance of Silicon Carbon Group in the national market last year was outstanding."

Yu Xing tentatively began to talk about the serious matter of the listing. After a pause and seeing that no one objected, he continued, "In fact, many people have given it the praise of a 'carbon silicon miracle.' Considering the establishment of the carbon silicon group's new energy brand and its promotion of industrial development, I think this is a very appropriate evaluation."

"With this listing in Hong Kong, we hope to leverage Hong Kong's resources..."

The voice of the head of the silicon carbon group was still interrupted.

Yu Xing calmly and naturally stopped speaking.

Cui Zhiyu felt uneasy again.

The people present seemed unsurprised by the interruption, and the ensuing commotion was more like enthusiasm for what was expected.

"Mr. Yu Xing, I hope you will cooperate with our investigation." The foreigner in the middle spoke, now standing up and speaking loudly, "We hope you can provide a reasonable explanation for Guoshanfeng's series of short-selling activities in Europe!"

Although the foreigner's Chinese intonation was a bit strange, he spoke very fluently.

After he stood up, he faced the eyes and cameras of the entire audience and walked step by step along the aisle, saying as he went: "You need to take responsibility for the losses caused by the short selling of European car companies by Guoshanfeng!"

"You must be held accountable for the fraud, insider trading, and market manipulation that Guo Shanfeng is suspected of!"

As the foreigner got closer, the number of camera flashes increased.

Faced with the questioning, Yu Xing remained calm and instead said, "Give him a microphone so he doesn't have to shout. Or, do you prefer to sit or stand?"

Following his question to the foreigner, he asked, "Also, what's your name?"

The foreigner took the microphone and stopped at the front row: "I am Bauman, from BaFin in Germany and also from the EU Joint Task Force on Economic Crimes."

Yu Xing nodded slightly, followed his gaze, and asked, "Bauman, hello, do you have any companions? Do you need more microphones?"

Bowman looked back, and as he did so, two more foreigners stood up. One of them did not understand Chinese, and according to their self-introductions, they were also members of the EU Joint Task Force on Economic Crime.

The three met in the front row. Bowman, who was clearly in charge of the trip to Hong Kong, insisted on standing, unwilling to sit there and accept the condescending gaze of the big short seller.

Not only were there reporters present, but also financial professionals, members of wealthy families, Hong Kong Stock Exchange staff, and onlookers. Upon seeing the confrontation, they all took photos and posted them on social media.

What's the point of attending the "King of Short Sellers' Meeting"? Isn't it just to see this?
“Bauman, I understand your investigation into Guo Shanfeng, but Guo Shanfeng and I have already engaged several lawyers to handle this matter.” Yu Xing gestured to the left, “Like Mr. Deng Ning, he is already communicating with your European investigation team.”

Graham Dunning, a renowned European barrister and authority in commercial litigation, accompanied the delegation to handle potential legal proceedings and investigations.

He didn't understand Chinese, but the simultaneous interpreter he had prepared in advance quickly explained the emergency situation on site.

Dunning exchanged a few words with Bowman in English, but the latter was clearly very agitated.

They were both speaking very quickly, and Yu Xing only caught the gist of it; it was all about the back-and-forth of legal provisions.

Bowman has already accused Dunning of being an accomplice of the big short sellers.

Yu Xing now knows that he is facing the attention of the global media, and this incident may even be related to subsequent lawsuits and potential global market impact. He did not consider having security guards carry the three people out, nor did he try to arrange to communicate in other occasions.

This is certainly an inquiry, an investigation, and also an attempt to seize the high ground.

“Bauman, Mr. Bowman,” Yu Xing interjected during a pause in their conversation, “I’m not surprised you’re here, but I have a question that I’d like to get answered by Europe and your investigation team.”

Bowman faced this Eastern short seller head-on without answering, but his eyes signaled for further comment.

Yu Xing did not laugh, as laughter in this situation could easily be interpreted as contempt.

He looked confused: "This press conference is very important to me, and to Guoshanfeng as well, so I tried to invite guests who could prove our legitimacy."

Yu Xing stopped there.

Bowman waited two seconds before speaking coldly: "What guest can prove the legitimacy of Mountain Peak? Is it the legal representative of your offshore company? Or the person in charge of your trust?"

Yu Xing remained calm and composed, saying, "I called Volkswagen, Renault, Daimler, Kobe Steel, Sino-Forest, and other companies that had shorted Shanfeng, but strangely, not a single one of them was willing to come here."

Bowman frowned.

Yu Xing stopped looking at the foreigner and instead scanned the entire room, facing numerous cameras: "I see that everyone here today includes representatives from the Hong Kong Stock Exchange, banks, securities firms, media, investors, and ordinary citizens, but there are no representatives from companies that have been targeted by short sellers like Guo Shanfeng."

"The Silicon Carbon Group will hold a press conference on January 9th, and my presence here is public knowledge, as reported by the media. Mr. Bauman, why are they unwilling to come?"

Bowman tried to speak, but was interrupted by Yu Xing's faster pace of speech.

Yu Xing also raised his voice: "There is a kind of opinion in the public that I find very strange. Some people are actually trying to defend those companies that commit fraud. At this moment, even those companies whose scams have been exposed do not dare to stand in front of me. They have already had to face the consequences of their fraud. How can there be people who feel wronged for them?"

He then looked at Baumann, who was standing in the front row, and asked, "BMW, Mercedes-Benz, and Volkswagen were exposed two years ago for monopolistic practices. Mr. Baumann from the EU investigation team, why haven't they received the legal punishment they deserve?"

Bowman immediately replied, "Their monopoly is under investigation, and no illegal activity can escape legal punishment! Including Guo Shanfeng! Including you!"

Seeing that Mr. Yu was about to raise the microphone again, he added, "You're not the king of short sellers, you're the king of fraud! You're manipulating hundreds of billions of dollars to attack the global financial markets..."

Yu Xing adjusted the microphone volume, raising his voice to drown out the other person, and suddenly stood up to question, "You said that no illegal act can escape legal punishment, does that include you?!"

Bowman paused, then said, "Of course, that includes me."

Yu Xing then asked: "According to Article 48 of the Charter of Fundamental Rights of the European Union, everyone should be presumed innocent until proven guilty by law. Isn't this a law that you and all EU institutions need to enforce?"

Bowman met the short-selling king's gaze and replied, "We have some evidence that you and Guo Shanfeng are suspected of..."

Just as he was about to continue speaking, the microphone suddenly went silent.

"The EU's Short Selling Regulation (SSR) fully adheres to the presumption of innocence principle, which is the constitutional cornerstone of EU law," Yu Xing pressed. "Since it's a suspected crime, please establish the suspicion before calling me the 'King of Fraud.' Otherwise, isn't this just a case of 'wanting to find a pretext'?"

Bowman tapped the microphone, and his voice came through again: "You should cooperate with our investigation. You and Guo Shanfeng are trying to escape punishment by exploiting the differences in laws between different regions! The Hong Kong Stock Exchange should not allow the company you founded to enter the secondary market!"

Yu Xing went straight to the heart of the matter: "Again, it's about being suspected and trying to escape punishment. In Hong Kong, a place ruled by law, do you expect me to prove my innocence? Shouldn't you be the ones providing a complete chain of evidence?"

This is a very crucial question.

The investigation itself does not imply guilt; the final result must go through hearings, rulings, and other procedures before an independent body makes a judgment.

The EU is also considering enacting specific legislation to strengthen the presumption of innocence, and it is highly likely that a directive on strengthening certain aspects of the presumption of innocence and the right to appear in criminal proceedings will be passed in the first half of this year, further refining the rules for the application of the presumption of innocence.

This, of course, strongly prohibits presumption of guilt against suspects in judicial proceedings.

Guoshanfeng has assembled a European legal team, and this fundamental principle will be a major reliance for subsequent legal proceedings. Indeed, as Bauman said, the chain of evidence is difficult to construct completely due to differences in laws in different regions and the confidentiality of offshore companies.

Even now, the isolation provided by offshore structures remains effective, and this effect is not diminished by the exposure of Yu Xing's identity. To prove Yu Xing's guilt, the connection between him and the short-selling funds should be proven, not by demanding that Yu Xing prove his innocence.

Of course, there may be minor deviations in actual judicial practice, and the team of lawyers is there to ensure the correctness of judicial practice.

Bowman was driven by personal feelings, as a large portion of his wealth had vanished during the short selling of the mountain peak, a situation not uncommon among his colleagues.

His shout of "King of Fraud" was more of a venting of personal emotions; the calmness of the Eastern short seller only made him angrier and more agitated.

However, as a member of the German BaFin and the EU investigation team, he could not deny the spirit and regulations of the EU's constitutional laws in front of numerous media outlets.

Bowman stared at Yu Xing, who appeared agitated but remained calm in his eyes, and said, "No one can escape legal punishment. This applies to BBA, and it applies to Guoshanfeng as well..."

At this point, barrister Dunning protested, arguing that Bauman from the European Union was still presuming his client guilty.

Yu Xing continued, "Of course that's how it is. I believe in the law, and I hope you don't confuse the terms of self-incrimination with disclosure. Also, your public implied guilt today carries the risk of litigation. As for whether I should sue..."

Bowman scoffed; he had seen many similar attempts to manipulate people throughout his career.

Yu Xing turned his attention back to the scene: "This kind of protection of legitimate rights is also a manifestation of the rule of law. Whether to sue or not, I would like to hear everyone's opinions."

The audience watched with great interest as the saying "Short sellers aren't scary, what's scary is a short seller with culture" came up, and they were surprised to find that there was even an interactive segment.

In an instant, just like that, there was a small burst of "Announcement announcement" sounds, followed by a chorus of "Announcement announcement" that ignited the entire venue.

Tell me!
Tell me! !

Yu Xing readily accepted the good advice and upheld the rule of law, saying to Deng Ning, "I entrust you to pursue the matter of the negative impact caused by this European gentleman's presumption of my guilt."

As Bowman listened to the cacophony of voices, he suddenly felt a tangible sense of short sellers manipulating the financial markets.

He heard "swear, swear, swear," looked at Deng Ning's eyes, picked up the microphone but no sound came out.

“We must uphold the rule of law and not apply double standards.” Yu Xing’s voice still rang out. “Regardless of size, we hope this applies to all companies. Many of those companies that were shorted by Guoshanfeng have already been punished, while others are still under investigation. We hope that the legal spirit that Mr. Bauman is here to guide us on today will be fully implemented.”

The applause was still mixed with boos.

Yu Xing felt that this might be the most special meeting he would ever experience.

The security guards, having received a signal, were already approaching the displeased European trio.

Yu Xing raised his voice again: "I have something to say! It's very important! I have something to say!"

The scene quieted down, and even the trio looked at the short seller.

"Carbon Silicon Group is an excellent company with a huge market and promising prospects." Yu Xing took the opportunity to promote their business, "We hope everyone can support us. In the future, we will also launch suitable new models in Hong Kong and the global market!"

This time, the entire audience booed.

Yu Xing was also a little helpless, and turned around to point to the words "Carbon Silicon Group Prospectus Release Conference" on the screen.

The European investigation team has no law enforcement authority in Hong Kong. Objectively speaking, their performance on this trip was not professional enough, and their eventual coercion into "suing" was even more embarrassing.

However, just as Yu Xing sat down and the trio headed towards the exit, the quiet scene was suddenly filled with noise again.

"Wait! Wait! I want to report this!"

Another foreigner stood up and roared, this time from the back row.

With everyone's eyes on him, he shouted, "I want a microphone too!!"

The European trio stopped in their tracks, first looking at their compatriots, then at the bewildered Yu Xing on stage.

Yu Xing wasn't acting; he was genuinely taken aback. After a couple of seconds of hesitation, he said, "Give him a microphone."

"My name is George, and I want to report the listed company Steinhoff for fraud!" The foreigner quickly grabbed the microphone and made his voice even louder, "My report in Germany was ignored! They didn't listen to me! And they even made me lose my job!! Steinhoff is committing fraud!!!"

Yu Xing immediately reached out his hand: "Wait, Bowman, please stay."

Bowman didn't move: "Although it's not within my scope of responsibility, I will check on the situation when I get back."

Yu Xing had Cui Zhiyu and Deng Ning switch places, then urgently checked Steinhoff's basic information, before turning to talk to the senior lawyer.

In those two minutes, whistleblower George accused Steinhoff of fabrication and also accused the billionaire Wiese behind it of persecuting his life.

With the support of his lawyer, Yu Xing patted the microphone and mentioned Guoshanfeng: "Guoshanfeng is an independent research institution. Based on its research, I have indeed done some financially compliant short selling."

"Everyone knows that the research reports issued by Guo Shanfeng in the past have been verified. Some people speculate that I obtained them through insider information, but that's ridiculous. If insider information were so easy to obtain, Wall Street would be full of invincible short sellers."

He emphasized, "It's not insider information, it's not market manipulation. Guoshanfeng simply takes the research on the fundamentals of listed companies to the extreme."

Yu Xing operated the computer, and the large screen behind him displayed basic information about the German listed company Steinhoff.

As he operated the system and extracted information, he continued, "I know many people don't believe this, including the investigation team, but I think people just have a biased view of listed companies, so they selectively ignore some common-sense issues."

"I must emphasize that the research conducted by Guoshanfeng and my personal statements are not instructive and do not recommend any financial operations related to stocks."

As more and more information about Steinhoff was displayed on the big screen, the people in the Diamond Ballroom seemed to realize something, and a persistent buzzing sound suddenly filled the room.

Among those present were representatives from banks, securities firms, hedge funds, and even short sellers. They sensed from his words that the "King of Short Sellers" seemed to want to analyze the company's fundamentals directly on the spot.

"The Steinhoff company mentioned by Mr. George is a German publicly listed company. Let's take a quick look at its financial statements..."

Yu Xing showed no politeness whatsoever and directly opened the financial report to read the information.

In fact, setting aside the fundamentals, what kind of spirit is it for a foreigner to travel all the way to a meeting of the "King of Short Sellers" to go to such lengths to report a German listed company?
From George's few words, it's clear he's looking for a space magnate!

Yu Xing started with a sentence, but didn't continue smoothly, which made everyone hold their breath.

The three members of the EU investigation team exchanged glances. Bauman looked suspiciously at the big short seller on the stage, almost suspecting that the other party had hired a shill.

“There is a lot of information in the financial report, but as friends who often read financial reports know, much of it is routine,” Yu Xing resumed speaking, and then emphasized, “I have no position on Steinhoff Company. This does not mean that I am trying to determine that it has committed fraud. We are just looking at its fundamentals in response to a question raised by an investor.”

“Okay, now we have something unusual going on: this company has made more than 20 cross-border acquisitions in the past three years, involving multiple sectors such as home furnishing retail and department stores.”

“Looking at this data, its goodwill was 12 billion euros in 2013, but it reached 58 billion euros in 2015, accounting for more than 40% of total assets.”

“We can’t easily conclude that there’s a problem here; it’s just not quite the norm. However, if a company is committed to rapid expansion in the global market, it’s normal for it to make too many acquisitions.”

Yu Xing's voice carried a thoughtful tone as he annotated the unusual information on the computer screen.

He fell silent again.

Five minutes later, Yu Xing's voice rang out again in the silent room, speaking rather slowly: "But now I have a question for the professionals here: how did the European retail market perform last year?"

Ten seconds later, a man with gold-rimmed glasses raised his hand and answered: "According to Eurostat data last year, the growth rate of the European retail market was only 1.2%."

“I know that Europe’s economic performance has been poor in the past few years.” Yu Xing affirmed the recurrence of this data in light of the vague background, and continued to highlight the key points on the screen. “But in such a slow growth rate, there is one performance of Steinhoff that I find very impressive when I browse through the financial reports of many listed companies: it seems that all the companies it has acquired have achieved 100% of their performance commitments.”

"Hmm, let's do a search. The companies it acquired are in South Africa and Eastern Europe. Hmm, it seems to be more focused on emerging markets, but none of them require goodwill impairment. Can someone with experience in the retail industry explain this to me? Is this normal?"

One question and one answer, followed by another question.

This seems to indicate that something unusual has indeed occurred.

Inevitably, murmurs and discussions arose at the scene.

Thirty seconds later, a middle-aged man stood up and said in broken Mandarin, "This is impossible! I am Cao Yiheng, the vice president of the Hong Kong Retailers Association. Mr. Yu, this is impossible!"

He didn't answer whether it was normal or not, but gave his conclusion directly.

Vice President Cao Yiheng took the microphone that was quickly handed to him: "The competition in the retail industry is already very fierce, especially in markets like South Africa and Eastern Europe. They not only face market competition, but also exchange rate fluctuations. Someone just mentioned that the growth rate of the European retail market is only 1.2%, which proves that its consumption is indeed very weak!"

"The performance stability of the retail industry is inherently poor, not just poor, but extremely poor. For more than 20 acquisitions to achieve 100% of the performance commitments without any goodwill impairment provisions is simply impossible!"

Yu Xing grunted in agreement and gestured for the seasoned retail professional to sit down.

After Cao Yiheng sat down, he suddenly shouted again, "I'm not a shill! If I'm President Yu's shill, may my son be born without an anus!"

The room erupted in laughter, and some people even recognized the vice president.

“Okay, what Chairman Cao provided is probably a common sense judgment. Based on this common sense judgment, let’s look at an unconventional indicator in the financial report.” Yu Xing scrolled up the page and highlighted the key points. “The targets of this company’s acquisitions all have a price-to-earnings ratio of 20-30 times, but as far as I know, the retail industry has only had a price-to-earnings ratio of 8-12 times in recent years.”

“Following this unconventional data, well, this one is also quite unconventional. It issued 15 billion euros in bonds last year, labeled as supplementing working capital, but its dividends increased from 1.2 million euros to 2.5 million euros during the same period. It was borrowing money on one hand and paying high dividends on the other. This is quite different from the cash management logic of retail companies.”

Yu Xing scrolled down the webpage from top to bottom, not using the word "falsification," but speaking in a restrained tone: "Unconventional, unconventional, still unconventional. Such unconventional data performance, hmm, this listed company's audit report last year was issued by a small to medium-sized firm that is not one of the Big Four accounting firms. It also emphasized that 'there is significant uncertainty in the fair value assessment of the target company,' but in the end, it still issued a 'standard unqualified opinion,' tsk."

For a multinational listed company, especially one that frequently engages in mergers and acquisitions, its decision to forgo the Big Four accounting firms and choose a smaller firm for auditing reveals a whiff of evading rigorous auditing.

Before Yu Xing could even give his assessment, people in the audience were already shouting it out.

"It's fake! It's fake!!"

Yu Xing looked at the person who hastily gave his conclusion: "I am a very conservative short seller. I don't think it's fabricated. This is just a fundamental study based on publicly available information, but such unconventional performance will indeed be included in my subsequent discussion."

As Yu Xing spoke, a lot of information was released from the scene, and many short sellers from Europe and the United States quickly turned their attention to Steinhoff Company, and the accounting firm that audited it last year also quickly received the information.

The king of short sellers has arrived!

That's... terrible!

(End of this chapter)