Behind the stock auction failure: What will happen to Xiwang Food's 1.5 billion related-party deposits? Who will take over?

Interface News reporter | Niu Qichang

After a 24-hour auction, nearly 200 million shares held by controlling shareholder of Xiwang Food (000639.SZ) under Xiwang Group were left without a single bidder.

On March 31, Interface News learned from Xiwang Food’s securities department that whether a second auction would be initiated after the auction failed would depend on the subsequent arrangements of the mortgagee and the court’s execution status. At present, the company’s operations are normal.

Behind this auction concerning who will control “the first corn oil” company, in response to rumors from outside that Xiwang Food would be taken over by local state-owned assets or that existing strategic investors had already made contact, an insider from Xiwang Group told Interface News that the above information is not true. As of now, there has been no report that local state-owned assets have taken over Xiwang Food, nor has there been any contact or negotiations between strategic investors and Xiwang Group regarding a transfer of control.

What is even more unsettling for investors is that the audit institution is about to issue a non-standard opinion on the company’s annual report—which means that before control is settled, Xiwang Food may be the first to put on the ST label.

For any potential acquirer, there is another major problem in front of them: how to dispose of the nearly 1.5 billion yuan in deposits that the listed company holds in the financial company of Xiwang Group.

“ST” is getting closer, and the auction is cold

From 10:00 a.m. to 10:00 a.m. the next day on March 30 to March 31, 200 million shares held by Xiwang Food’s controlling shareholder, Xiwang Group, were publicly auctioned on JD’s judicial auction platform. However, after 24 hours of listing, no one placed a bid.

For Xiwang Group, this auction can be described as a “clear-the-shelf-style auction.” The auctioned shares account for 99.01% of the company shares it holds, and 18.53% of the company’s total share capital. If the auction is successful, the combined shareholding of Xiwang Group and its concert parties, Shandong Yonghua Investment and Wang Di, would drop sharply from 52.51% to 1.87%, and the company’s controlling stake would be transferred accordingly.

Judging from the starting price, although the offer price per share of 2.618 yuan was lower than the closing price of 2.88 yuan on the same day as the auction, no investors were willing to buy.

Interface News noted that over the past two years or more, the shares held by Xiwang Group and its concert parties have repeatedly been subject to judicial dispositions. As of now, the total shares that have been auctioned amount to 547 million shares, accounting for 50.64% of the company’s total share capital. Meanwhile, “bullish individual shareholders” active in the forced auction market such as Fang Lei, Li Songfeng, Zhong Ge, and others have entered the company’s top ten shareholders through repeated bidding.

This is entirely different from the auction one year earlier (April 29, 2025). At that time, all the stocks held by Xiwang Group as auction targets were successfully sold, and bidders placed bids on each target nearly more than 20 times. Now, under the potential “ST” risk, Xiwang Food’s share price hit a one-word limit down the day before, leading to a cold auction.

On March 27, the audit institution believed that the company “failed to provide sufficient and appropriate audit evidence,” and would issue an audit report with a disclaimer of opinion (non-absolute opinion) and express a negative opinion on the effectiveness of internal control in the financial reporting.

Source: JD

For this outcome, the market seems unsurprised.

A partner at a private fund told Interface News that the amount of the auctioned assets is large and scattered. Combined with the company’s performance losses year after year, and with risks of a non-standard annual report nearing, uncertainty about the future share price trend increased, making it unsurprising that the first auction failed.

Huang Xi, a lawyer at Beijing Zhonglun Wende (Chengdu) Law Firm, told Interface News that according to Article 26 of the “Several Provisions of the Supreme People’s Court on Issues Concerning Online Judicial Auctions by People’s Courts,” if no bids are placed during the bidding period of the online judicial auction for Xiwang Food’s equity, then in this auction’s failed case, the reduction in the starting price for the second auction may not exceed 20% of the starting price of the previous auction. For a re-auction, the asset can be disposed of on the same online judicial auction platform through asset transfers/sale by auction.

“If the second auction is still unsuccessful, according to relevant legal provisions, the court may price it and hand it over to the applicant for execution or other execution creditors to offset debts. If the applicant for execution or other execution creditors refuse to accept it or cannot deliver it for offsetting debts according to law, it should be resold within 60 days.” Huang Xi told Interface News that if the second auction of Xiwang Food’s equity succeeds, and with the agreement of the applicant for execution, and without harming the legitimate rights and interests of other creditors or social public interests, the people’s court may deliver the property after pricing it to the applicant for execution to offset debts, or deliver it for the applicant for execution to manage.

Regarding the next steps, a relevant person in charge from Xiwang Food’s securities department told Interface News that the arrangements and related prices for the subsequent second auction are still not determined, and the final execution plan will be decided by the court.

From a debt crisis to the deterioration of operations of a “dual principal business”

The direct trigger for this auction is that in 2019, Xiwang Group had a debt issue: a 2.072 billion yuan equity pledge financing matured and was not cleared. The financing party was Binzhou Key Enterprise Development Fund Partnership (Limited Partnership), which has a local state-owned assets background.

At the time, that fund was regarded as key rescue capital used by local governments to resolve Xiwang Group’s liquidity crisis. However, seven years later, that money ultimately failed to turn the situation around.

Xiwang Group’s debt crisis can be traced back to an event of default on debts by Qixing Group as early as 2017. As a private enterprise in Zouping County, Shandong, Xiwang Group had large amounts of mutual guarantees with Qixing Group, involving guarantee amounts ranging from 2.464 billion yuan to 2.907 billion yuan. Under coordination by local governments, although Xiwang Group “exited” with a 10% guarantee proportion, its credit had effectively collapsed at financial institutions, leading to financing channels being nearly frozen.

In October 2019, Xiwang Group experienced a bond default and fell into a debt crisis of over 10 billion yuan. In 2020, the company reached a settlement with the debtors and extended the debt reduction/deleveraging cycle through installment repayments, debt-to-equity conversion, and other measures. However, the settlement plan did not fully resolve the crisis.

According to Tianyancha, as of now, Xiwang Group still has 4 information records as a person subject to enforcement, with a total enforcement amount as high as 2.598 billion yuan. The company is also listed as a dishonest person subject to enforcement, and the de facto controller, Wang Yong, has been restricted from high consumption multiple times.

Source: Tianyancha

If the debt crisis of the controlling shareholder is like a sword of Damocles hanging over the company, then Xiwang Food’s own operational predicament is a more realistic survival crisis.

According to the earnings forecast, the company expects to have a loss attributable to shareholders of 880 million yuan to 1.32 billion yuan in 2025. This will be Xiwang Food’s fourth consecutive year of losses after three consecutive years of losses from 2022 to 2024. If calculated based on the lower end of the loss, the cumulative losses over four years are nearly 2.4 billion yuan.

The core issue driving the continued deterioration of performance points to a cross-border acquisition in 2016 that the market viewed as a “small swallowing a big” deal.

That year, Xiwang Food, together with Chunhua Capital, acquired Kerr, a Canadian sports nutrition company, for 4.875 billion yuan. At the time, the company’s total assets were only 2.218 billion yuan. This acquisition aimed to build a “plant oil + sports nutrition” dual-principal business structure, but it became a heavy burden that continuously dragged down performance.

In 2024, the sports nutrition segment led to the company recording goodwill and intangible asset impairment losses of about 863 million yuan. In 2025, affected by the continuous rise in raw material whey protein prices and intensified industry competition, the segment’s performance is still expected to fall short of expectations, and the company expects to record intangible asset impairment losses of 950 million yuan to 1.5 billion yuan.

Meanwhile, growth in the traditional corn oil principal business has also been weak. From 2022 to 2024, revenue from the plant oil business fell continuously from 2.853 billion yuan to 2.253 billion yuan. In the first half of 2025, revenue was 942 million yuan, down another 11.84% year over year.

Source: Tushare?

How will the 1.5 billion yuan related-party deposits be dealt with?

At the time of Xiwang Group’s “clear-the-shelf-style” auction of equity, market rumors suggested that potential buyers might be local state-owned assets platforms or traditional leading grain and oil enterprises.

The aforementioned relevant person in charge from Xiwang Food’s securities department said that the matter is related to the controlling shareholder’s own business, and the company was not involved in any related outreach and does not know the specific situation. Regarding the company’s annual report being issued with a non-standard opinion, the company is communicating with the audit institution, but whether the issue can be removed is still uncertain.

In response to rumors outside that Xiwang Food might be taken over by local state-owned assets or that strategic investors had made contact, an insider from Xiwang Group confirmed to Interface News that as of now there has been no contact or negotiations between any local state-owned assets or strategic investors and Xiwang Group regarding the transfer of control.

If Xiwang Food changes hands, a major thorny issue facing the new controlling shareholder is how to dispose of the nearly 1.5 billion yuan in deposits that the listed company holds in the financial company of Xiwang Group.

Interface News noted that as of the first half of 2025, the funds that Xiwang Food has deposited in the financial company of Xiwang Group were as high as 1.435 billion yuan.

Placing over 90% of monetary funds with a related-party financial company has repeatedly drawn market criticism and questions from the Shenzhen Stock Exchange since 2020. In response, Xiwang Food has repeatedly denied that there were circumstances where Xiwang Group and its concert parties misappropriated funds for non-operational purposes or provided illegal guarantees that harmed the interests of the listed company.

Regarding this amount of money, the aforementioned relevant person in charge from Xiwang Food’s securities department told Interface News that “if the listed company has operational needs, it can withdraw the funds at any time.”

It needs to be noted that the asset quality of Xiwang Group’s financial company is likely deeply tied to Xiwang Group’s operational situation. That company has also already been listed as a dishonest person subject to enforcement. Meanwhile, across the A-share market, cases where a listed company’s funds placed with a related financial company cannot be fully recovered are not rare.

In this regard, the aforementioned partner at the private fund told Interface News that if the funds of the financial company have already been used for internal group turnover, the “availability” of this deposit would be significantly reduced. If the new controlling party is a strategic investor with demands related to industrial operations, the first thing after taking over might be to pursue this money. Legally, there is no dispute about the ownership of this fund, but its actual availability depends on the operating condition of the financial company and the bargaining power of the new shareholders.

As the second auction, asset transfers, or procedures of using shares to offset debts are advanced, the future ownership of control over Xiwang Food remains unknown. And this contest around the “1.5 billion yuan related-party deposit” seems to be just beginning.

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Editor: Song Yafang