Shenzhen Stock Exchange Issues Letter of Concern to Telling Telecommunication, After Stock Soars 267%

Telling Telecommunication’s share price opened down on Monday falling as low as 24.21 RMB per share. Since the beginning of August of this year, the stock has surged more than 220%. After today’s limit down was hit, Telling Telecommunication’s total market value was just 24 billion yuan ($3.719 billion).

On the evening of September 10, Telling Telecommunication announced that the company planned to participate in the joint acquisition of a mobile phone brand business involving brand trademarks, R&D and supply chain. The name of the phone brand was not disclosed by the company.

The takeover is still in its early stage of negotiations and no letter of intent or related transaction agreement has been signed yet. Since the announcement, the company has not yet determined the transaction subject nor clarified which specific asset class or type of transaction it is considering. Furthermore, it appears that no other research, auditing, evaluation or other due diligence has been conducted as of yet.

On the evening of September 12, the Shenzhen Stock Exchange issued a letter of concern to Telling Telecommunication, asking the company to explain whether there was information leakage or insider trading in light of the recent surge in the company’s stock price. The company is also requested to provide a list of insiders and their immediate family members who might have access to inside information.

In addition, the Shenzhen Stock Exchange is requiring Telling Telecommunication to supplement the current holdings of its controlling shareholder in addition to any shareholders who hold more than 5% of the company’s shares. All directors, supervisors and senior management are required to disclose their share holdings and transactions for the three months before the announced takeover and any plans they had to increase or decrease their holdings within the next three months.

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Telling Telecommunication is a leading mobile phone agent in China, and its main partners are major mobile phone brands such as Apple, Huawei and Samsung.

The company’s 2021 semi-annual report shows that it achieved an operating income of 37.556 billion yuan, an increase of 26.64% over the same period of last year. The company’s net profit attributable to shareholders of listed companies was 86.96 million yuan, an increase of 19.30% over the same period of last year. From the gross profit margin of the company, it has been low in recent years, sitting at only 2.72%.