Ganfeng Lithium announced on July 3 that the company had received a Notice of Case Filing from the China Securities Regulatory Commission (CSRC) for suspected insider trading of an A-share listed company’s shares in the secondary market.
According to the announcement, the CSRC filed the case as early as January 24 this year, but the company only received the notice on July 1. On the evening of July 3, Li Liangbin, Chairman of Ganfeng Lithium, said in an interview with domestic media that the company was investigated by the CSRC, mainly because it bought shares of Jiangxi Special Electric Motor Co., Ltd., during the negotiation with the latter.
Li Liangbin said that Ganfeng Lithium began to contact Jiangxi Special Electric Motor on June 18, 2020 to discuss mergers and acquisitions, and then purchased its shares on June 23. At that time, the stock of Jiangxi Special Electric Motor had been marked with *ST (that is, the company suffered losses for three consecutive years and was at risk of delisting). “We formally signed an M&A agreement and issued an announcement in July. The regulators believe that our behavior constitutes insider trading.”
“The company may be punished by some fines through this investigation, and it may have an impact on the company’s future refinancing for about one year,” Li Liangbin added.
Ganfeng Lithium issued the agreement announcement on cooperation with Jiangxi Special Electric Motor on August 19, 2020. According to the announcement, Ganfeng Lithium and Jiangxi Special Electric Motor signed a cooperation agreement on a lithium salt production line in Xinyu city, Jiangxi Province, and planned to deliver the lithium salt production line owned by Yichun Yinli New Energy Co., Ltd., a subsidiary of Jiangxi Special Electric Motor, to Ganfeng Lithium for independent production, operation and management. The cooperation period was to last 30 months, starting from October 1, 2020 until March 31, 2023. During the period, Ganfeng Lithium paid cooperation management fee of a total 192 million yuan to *ST Jiangxi Special Electric Motor.
However, two months later, Ganfeng Lithium issued an announcement on the termination of the deal. On October 28, 2020, the company signed a Cooperation Termination Agreement on Lithium Salt Production Line with Jiangxi Special Electric Motor and its subsidiary. Because both parties failed to reach an agreement on the technological transformation plan for the lithium salt production lines, upon due diligence, the parties have decided to abandon the cooperation and terminate the Cooperation Agreement.