An electronic components company with over two decades of history has seen its dreams of a ChiNext IPO and subsequent acquisition by a listed company both end in termination.
Better Electronics, a Dongguan-based supplier to clients like BYD and Midea, withdrew its IPO application last year under mysterious circumstances. The truth behind its "rushing through with flaws" was only revealed in a regulatory filing disclosed by the Shenzhen Stock Exchange on October 24.
Issues such as non-compliant disclosures, off-balance-sheet funding, and inaccurate R&D personnel data came to light, implicating not only the company but also its sponsors, auditors, and legal advisors. Meanwhile, Yangjie Technology’s plan to acquire Better Electronics for RMB 2.2 billion in cash was also scrapped.
**From IPO Sprint to Withdrawal** Founded in August 2003, Better Electronics specializes in the R&D, production, and sales of power electronic protection components and related accessories. Its products are widely used in automotive electronics, photovoltaics, energy storage, and consumer electronics, serving top-tier clients including BYD, Shoals, EVE Energy, and Midea.
On July 1, 2022, Better Electronics signed a sponsorship agreement with Minsheng Securities to initiate its A-share IPO process. Its ChiNext IPO application was accepted by the Shenzhen Stock Exchange on June 27, 2023, and underwent two rounds of inquiries in July 2023 and February 2024.
The company only responded to the first round of inquiries in January 2024 and updated its prospectus (draft) by the end of June. According to the prospectus, its revenue from 2021 to 2023 was RMB 449 million, RMB 561 million, and RMB 627 million, respectively, with a compound growth rate of 18.19%. Net profit after non-recurring items for the same period was RMB 30.48 million, RMB 67.22 million, and RMB 82.79 million, showing a staggering 64.80% compound growth rate.
Despite strong financials, Better Electronics abruptly withdrew its IPO application in August 2024 without explanation. The Shenzhen Stock Exchange’s subsequent disclosure revealed that the withdrawal was likely tied to disclosure violations.
Regulatory filings showed that Better Electronics maintained an off-balance-sheet funding pool for expense payments, with a balance of RMB 703,300 by the end of 2023 and cumulative inflows and outflows of RMB 15.09 million and RMB 14.37 million from 2021 to 2023. More seriously, the company concealed a supplementary agreement with performance commitments and management rights during its acquisition of Dongguan Boyue.
Additionally, the disclosed R&D personnel data was found to be inaccurate. While the company reported 143 R&D personnel (141 full-time) at the end of 2022 and 145 (143 full-time) in mid-2023, regulators discovered that some "full-time" R&D personnel were either non-R&D staff or not fully dedicated to R&D.
**Regulatory Sanctions Hit Intermediaries** On October 24, the Shenzhen Stock Exchange announced penalties against Better Electronics and related parties: 1. A public reprimand for Better Electronics. 2. Public reprimands for five actual controllers and executives, including Chairman and General Manager Han Lu, for failing to ensure the accuracy and completeness of disclosures. 3. A circulated criticism for another controller, Huang Weiping.
The exchange noted that the controllers were aware of and directly involved in off-balance-sheet financing but failed to inform intermediaries, undermining due diligence efforts. CFO Zhou Youlin, responsible for financial management, was also reprimanded for withholding critical information.
The penalties extend to intermediaries: - Sponsors GLMS SEC’s two representatives, Wang Jianwei and Zhang Tengfu, received written warnings for "imprudent verification opinions." This marks the first penalty for GLMS SEC’s underwriting team since its restructuring in September. - Auditors Xiao Qiangguang and Chen Xinmin from Zhonghui CPA were similarly warned. - Legal advisors from Hunan Qiyuan Law Firm, including Liao Qingyun and four others, were cited for inadequate verification procedures.
**Failed Acquisition by Yangjie Technology** After its IPO failure, Better Electronics turned to a potential acquisition by Yangjie Technology, a semiconductor firm controlled by Liang Qin, Yangzhou’s richest woman. On March 13, Yangjie announced plans to acquire Better Electronics via a stock-and-cash deal, later shifting to an all-cash offer of RMB 2.218 billion in September.
However, on October 23, Yangjie abruptly terminated the deal, citing differences in business models, management styles, and corporate culture. The termination coincided with the Shenzhen Stock Exchange’s disclosure of Better Electronics’ regulatory violations, fueling speculation that the deal collapse was linked to the impending sanctions.
**Conclusion** Better Electronics’ saga underscores that an IPO is not a haven for concealing flaws nor a shortcut for speculation. From off-balance-sheet financing to false disclosures and a failed acquisition, the company has lost not just its listing eligibility but also market trust.
For intermediaries, this case reiterates the critical importance of rigorous due diligence in an era of tightening disclosure rules. In capital markets, the consequences of lost credibility extend far beyond regulatory penalties.