Sturgeon Technology, which suddenly delisted from the New Third Board in mainland China after a year, recently plans to shift its focus to the Hong Kong Stock Exchange, potentially becoming the first caviar stock listed in Hong Kong.

Key Points:

• The company has been rejected three times for listing in mainland China.
• It has previously attracted market attention due to related party transactions and involvement in false accounting.

Liu Zhiheng

When it comes to caviar, people often think of Russia, assuming it is the main production area. However, the largest producer of caviar is not a Russian company or a European enterprise, but rather Hangzhou Qiantang Lake Sturgeon Technology Co., Ltd. in China.

Sturgeon Technology, which just delisted from the New Third Board in mainland China last year, is eager to apply for listing in Hong Kong within a year. The company operates fish farms, producing caviar through the artificial breeding of sturgeon, and has a standardized processing procedure. In addition to supplying overseas caviar specialty stores and gourmet food companies, it also has its own caviar brand "Kaluga Queen."

Caviar World Leader

Although Sturgeon Technology has a short history of only 23 years, it has managed to surpass the caviar powerhouse Russia, largely due to the expertise of its founder, Wang Bin. He graduated from Dalian Ocean University and began researching sturgeon breeding in Beijing as early as 1998. He previously served as the general manager of the Sturgeon Breeding Technology Engineering Center at the Chinese Academy of Fishery Sciences. When Wang Bin founded the company in 2003, he received strong support from the Chinese Academy of Fishery Sciences, which also holds a 30% stake in the company.

Through Wang Bin's relentless efforts, Sturgeon Technology's business has flourished, reaching new heights 12 years after its establishment. According to ZhiShi Consulting, Sturgeon Technology's caviar sales have ranked first in the world for 11 consecutive years since 2015, with a market share exceeding 30% in the past five years, reaching 36.1% last year.

The company's performance in recent years has been impressive, with revenue projected to rise from 577 million yuan to 769 million yuan between 2023 and 2025, and net profit increasing from 270 million yuan to 363 million yuan during the same period. The net cash flow from operating activities is also expected to rise from 260 million yuan to 270 million yuan.

Just as Sturgeon Technology was getting on track in various aspects, Wang Bin's ambitions turned towards the capital market, aiming to leverage market forces to elevate the company to new heights. However, during the listing process, various shortcomings of the company were exposed.

Related Party Transactions Allegedly Involved in Fraud

In 2011, Sturgeon Technology applied to list on the domestic Growth Enterprise Market, but the application was rejected after it was discovered that its main supplier, "Zixing Liangmei," held a 4.99% stake in the company, with the related party transaction amount accounting for a significant proportion of the company's total revenue and net profit.

In 2014, the company made another attempt, but the China Securities Regulatory Commission raised concerns about the company's overseas sales, inventory levels, and shareholder structure, resulting in the application being denied.

During this period, Sturgeon Technology and Zixing Liangmei were embroiled in a legal dispute over the quality of supplied goods. Although Zixing Liangmei was ordered to return a deposit of 470,000 yuan, it was revealed during the process that the "Breeding Inventory List" provided in January 2012 to comply with Sturgeon Technology's listing requirements was incorrect. The exposure of this incident caused a stir in the market, severely questioning the company's integrity By 2022, the company attempted to go public again, this time targeting the main board of the Shenzhen Stock Exchange. However, after submitting the application, it did not receive a notice of acceptance from the China Securities Regulatory Commission (CSRC) for a long time, nor did it receive opinions and feedback from the Shenzhen Stock Exchange and the CSRC. Ultimately, the application ended without success.

After multiple unsuccessful applications, the company had no choice but to take a step back and turn to the lower-threshold New Third Board. It finally achieved its goal in March 2024 and was listed, but a year later, it lost interest and delisted in August of last year.

Integrity Issues Attract Attention

This time, as it shifts to the Hong Kong stock market, although the atmosphere in the Hong Kong IPO market has been hot for nearly a year, investors inevitably harbor concerns about Xunlong Technology. The most worrying issue is its integrity; in the past, the company was suspected of fabricating accounts to go public and was involved in related-party transactions, leading investors to doubt the credibility of its revenue and profits.

Even though the company emphasized in its application documents that it had clarified past issues, investors will still consider why Xunlong Technology was rejected by the CSRC and mainland exchanges three times previously and why it took years to resolve these issues. Are there still problems today that the outside world is unaware of?

On the other hand, the biological asset value from sturgeon accounts for a significant proportion of the company’s assets, with the past three years showing values of 1.39 billion yuan, 1.55 billion yuan, and 1.75 billion yuan, accounting for 92.5%, 84.6%, and 83.1% of net assets, respectively. However, the market has reservations about the fair value of biological assets, believing that their valuation is merely based on discounted cash flow calculations, but the input values contain significant unobservable risks.

Setting aside business and financial issues, geopolitical factors also pose a major challenge for Xunlong Technology. Currently, over 80% of the company's revenue comes from overseas, with the United States accounting for nearly 30%. It is important to note that the relationship between the U.S. and China remains tense, with the U.S. frequently imposing tariffs to suppress Chinese companies. Given Xunlong Technology's heavy reliance on overseas markets, its prospects are quite unstable.

Therefore, even if Xunlong Technology passes the approval of the Hong Kong Stock Exchange, it is advisable for investors to refrain from rushing to invest for the time being and to observe the company's business and stock price trends before making a decision later