• News
• 2024-09-22

Fude Stock Soars 200%, Company Reaps 15x Profit from Share Reduction

In recent days, Fulude has experienced consecutive daily increases,收获ing six consecutive limit-up days, becoming one of the focuses of the capital market. Many companies and institutions have also made a fortune by reducing their holdings in Fulude.

On October 24, Wan Ye Enterprise issued an announcement stating that the company sold a total of 3.2987 million A-shares of Anhui Fulude Technology Development Co., Ltd. (hereinafter referred to as "Fulude", 301297.SZ) through a centralized competitive trading method, accounting for 0.97% of its total share capital, with an average transaction price of 59.57 yuan per share and a transaction amount of 197 million yuan. After this sale, the company still holds 6.0513 million shares of Fulude, accounting for 1.79% of its total share capital.

Compared with the capital increase price of 3.76 yuan per share before Fulude's listing in 2020, the profit from this reduction is close to 15 times, and the unrealized profit of the remaining shares that have not been reduced exceeds 17 times.

The Fulude merger and acquisition project is the second targeted convertible bond project issued by A-shares since the "Rules for Issuing Convertible Corporate Bonds to Specific Objects by Listed Companies to Purchase Assets" was released. It is also the first targeted convertible bond restructuring project disclosed by listed companies since the "Six Mergers and Acquisitions" was released.

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Mergers and acquisitions have driven up market value by 220% at one point.

Since the resumption of trading on October 17, Fulude's opening limit-up has reached 19.98%, setting a 60-day high. From the 17th to the 24th, Fulude has accumulated six consecutive limit-up days. As of the trading day on October 28, Fulude's total market value has increased from 7 billion to 22.5 billion yuan, with an increase of 220% at one point.

The continuous surge in recent days can be traced back to a transaction by Fulude a month ago.

On September 25 of this year, Fulude announced that it was planning to acquire related assets of the semiconductor industry under the indirect holding shareholder FERROTEC Group (Ferrotec Holdings Corporation, hereinafter referred to as "Japanese Magnetic Control") and suspended trading from the opening of the market on September 26.

On October 16, Fulude released a more detailed transaction plan, and the company will acquire 100% of the equity of Jiangsu Fuluhua Semiconductor Technology Co., Ltd. (hereinafter referred to as "Fuluhua") by issuing shares and convertible bonds, with the issue price of shares and the initial conversion price of convertible bonds both at 16.30 yuan per share. However, since the audit and evaluation of Fuluhua's assets have not been completed, the total transaction price has not been disclosed.It is worth noting that the target of this transaction, Fulehua, has far more assets than Fulede, hence this merger and acquisition is also considered by the market as a "David and Goliath" acquisition.

Fulehua was established in 2018 and is controlled by Shanghai Shenhe Investment Co., Ltd. Its predecessor was the Copper Clad Ceramic Substrate Business Department of Shanghai Shenhe, focusing on the research and development, design, production, and sales of power semiconductor copper clad ceramic substrates. It is one of the few copper clad ceramic substrate manufacturers in China and abroad that have achieved full-process self-manufacturing. In 2023, Fulehua's AMB substrate production capacity has reached 5 million pieces/year, ranking second in the world, with a market share of 25%, and achieving sales revenue of about 700 million yuan. Fulehua is already in a leading position in the field of ceramic substrates.

Data shows that as of the end of June 2024, Fulede's total assets were 1.694 billion yuan, and net assets were 1.453 billion yuan; the total assets of the acquired company Fulehua were 3.893 billion yuan, and net assets were 3.022 billion yuan. In the first half of 2024, Fulede achieved operating income of 338 million yuan, and net profit attributable to the parent company was 50 million yuan; Fulehua's operating income was 899 million yuan, and net profit attributable to the parent company was 128 million yuan. Fulehua's asset and performance scale are more than twice that of Fulede.

In addition, both Fulede and Fulehua are companies under the control of Japan's magnetic control and are in the same semiconductor industry chain, mainly engaged in the business of power semiconductor copper clad ceramic substrates. Both companies are assets indirectly held by Japan's magnetic control, which fully controls Shanghai Shenhe, and Shanghai Shenhe holds about 50.24% of Fulede's shares and about 55.11% of Fulehua's shares.

Regarding the progress of this acquisition, outside analysis believes it is mainly related to Fulehua's failed listing. Starting in February 2022, Fulehua began the listing guidance and signed a listing guidance agreement with Huatai United Securities at that time. By March 2023, Fulehua disclosed the fifth progress of the listing guidance. However, Fulehua did not continue its IPO process but withdrew the guidance application in April 2023.

This acquisition through the merger and acquisition transaction with Fulede is also considered by the market as a form of "indirect listing". Fulede was established in 2017, with its main business being to provide one-stop precision cleaning and derivative value-added services for semiconductor and display panel manufacturers, and successfully listed on the Shenzhen Stock Exchange's ChiNext board in December 2022. Fulehua, which has not been able to list for a long time, has expanded the capital scale of the behind-the-scenes Japan's magnetic control through related transactions with Fulede.

Regarding the purpose of this acquisition, Fulede mentioned that it can help it improve the layout of industrial upgrading and accelerate the introduction of the production and manufacturing of key semiconductor components from semiconductor cleaning and value-added services.

Wanye Enterprise's financial management income in the first half of the year has declined sharply.

Wanye Enterprise, which is reducing its holdings this time, is a pre-listing shareholder of Fulede. Fulede's prospectus shows that in June 2020, the company started its first capital increase after changing to a joint-stock company. Fulede stated that this capital increase was mainly to introduce external investors to improve the company's equity structure and supplement working capital through financing.

Through this capital increase, Fulede introduced seven shareholders, including Yao'an Boghan, Wanye Enterprise, Shenwang Trading, Dongzheng Ruiyuan, Dongzheng Ruiqiao, Free Trade Zone Phase III, and Shanghai Xinku, with a capital increase price of 3.76 yuan/share, and a total capital increase of 165 million yuan. Among them, Wanye Enterprise increased its capital in Fulede by 35.156 million yuan, obtaining 3.68% of the company's shares and becoming the sixth largest shareholder of the company.Following the listing of Fulude, the stake of Wan Ye Enterprise was diluted to 2.76%. On January 2nd of this year, the lock-up period for Fulude's restricted shares expired, and the shares held by Wan Ye Enterprise and the other original shareholders of Fulude also became freely tradable. Since then, institutions have begun to gradually reduce their holdings in the company.

Before October 17th, shareholders, including the former third-largest shareholder Yao An Bo Han, who cumulatively reduced their holdings by 1.10% of Fulude's shares, saw their stake decrease from 3.63% to 2.53%. Dong Zheng Rui Yuan cumulatively reduced its holdings by 1.02%, with its stake dropping from 1.92% to 0.90%.

However, these reductions occurred before the resumption of trading on October 17th, with relatively lower premiums for the reductions. In contrast, Wan Ye Enterprise's reduction of 0.97% of its shares achieved a higher premium. In this regard, Wan Ye Enterprise stated in its announcement that the company's sale of stock assets is conducive to optimizing the company's asset structure, enhancing asset liquidity and operational efficiency, and promoting the company's sustained and healthy development as well as maximizing shareholder value.

After the reduction, Wan Ye Enterprise still holds 1.79% of Fulude's shares. Based on Fulude's current share price of 68.84 yuan per share, the company's remaining holdings have an unrealized profit of approximately 17.31 times.

According to public information, Shanghai Wan Ye Enterprise Co., Ltd., established in 1991, focuses on the research and development, production, and sales of integrated circuit equipment. The company has increased the proportion of integrated circuit business through external mergers and acquisitions and industrial integration strategies, especially in the research and development and industrialization of ion implantation machine products. Its subsidiary, Kai Shitong, is a leading ion implantation equipment enterprise in China, with multiple core technologies and patents, and its product delivery volume and process coverage rate are at the forefront domestically.

Although this reduction has brought Wan Ye Enterprise a considerable investment return, the previously disclosed semi-annual report data shows that Wan Ye Enterprise has also suffered significant losses in investments.

The latest financial report indicates that in the first half of 2024, Wan Ye Enterprise's operating income was 201 million yuan, a year-on-year decrease of 48.37%; the net profit attributable to the parent company was -71 million yuan, turning from profit to loss year-on-year.

Regarding the reason for the loss in the first half of the year, Wan Ye Enterprise stated that it was affected by the fluctuations in the financial market in the first half of 2024, leading to a decrease in the fair value of financial assets such as snowballs and stocks held by the company. The semi-annual report data shows that Wan Ye Enterprise's investment income in the first half of 2024 decreased by 62.7561 million yuan compared to the same period last year, a year-on-year decrease of 74.14%, mainly due to the snowball knock-out in the same period of the previous year.