5-Day Blitz: From 100 Million Disappearance to CSRC Investigation, Xilinxmen's Major Shareholder ATM Dream Shattered

On April 1, Dynasty Health Sleep Technology Co., Ltd. (hereinafter referred to as “Dynasty Health”) issued four major announcements in succession, fully exposing the internal crisis this mattress industry leader had long kept hidden to the spotlight of the capital markets.

The CSRC launched a case-filing investigation into the company. The actual controller was also the subject of a CSRC case-filing investigation. The shares of the controlling shareholder and its persons acting in concert were judicially frozen. As the listed company, Dynasty Health, acting as the plaintiff, sued the controlling shareholder and its persons acting in concert, seeking damages of nearly RMB 480 million.

Four announcements—each one was enough to make investors break into a cold sweat.

The fuse for all of this traces back to March 27. That day, Dynasty Health disclosed that RMB 100 million in funds from its subsidiary had been illegally diverted by internal personnel. On the very same day the announcement was issued, the Shanghai Stock Exchange quickly sent a regulatory work letter, requiring the company to conduct a comprehensive self-examination.

Once the regulator’s “radar” was activated, it pinpointed the problem with precision. Under the strong pressure of supervision, Dynasty Health carried out an internal self-examination. After just a few days, a more alarming truth came to light: the controlling shareholder may have used complex methods such as loan-to-loan rollovers and factoring financing to treat the listed company as its own “ATM.” The balance of non-operating funds占用 reached as much as RMB 190 million, far exceeding the regulatory red line.

From the March 27 regulatory work letter sent by the SSE to the CSRC’s formal case-filing investigation on April 1, only 5 days passed. From identifying the issues and prompting self-examination, to revealing the truth and pursuing liability, the regulator moved with lightning speed, quickly tearing open the internal control “black hole” of this listed company.

The company, which had once marketed itself with “protecting the spine,” is now, due to the collapse in internal governance, pushed to the brink of suspension risk with “other risk warnings.”

** Lawsuits, case-filing, and freezes: From the work letter to the case filing, the regulator’s “5-day lightning campaign”**

The April 1 announcement was, for Dynasty Health, no different from a public “trial.”

The information disclosed that day showed that both the company and its actual controller, Chen Ayu, simultaneously received from the CSRC a “Notice of Filing for Investigation,” with allegations pointing to “suspected violations of laws and regulations in information disclosure.” This means the regulator already had leads sufficient to initiate the case-filing process—this is absolutely not merely a routine inquiry letter, but the “doorstep token” for a formal investigation procedure.

What is truly worth focusing on, however, is the astonishing regulatory efficiency behind it.

Let’s rewind to March 27. That day, Dynasty Health announced that RMB 100 million of funds belonging to its subsidiary Xitu Technology had been illegally diverted. Almost at the same time, the SSE’s regulatory work letter had already been delivered to the company, requiring a comprehensive self-examination of the relevant matters. There was virtually no time gap between the exposure of the issues and the regulator’s intervention. The SSE’s rapid response was like a stone thrown into a calm lake, triggering a chain reaction of subsequent events.

Under the strong push from the regulatory work letter, Dynasty Health was forced to conduct internal self-examination. Within just a few days, the controlling shareholder’s funds占用 issues hidden behind complex transactions were uncovered layer by layer. From loan-to-loan rollovers to factoring financing, an interest-transfer chain spanning several hundred million yuan gradually became clear.

The CSRC’s actions, moreover, ran like a “lightning campaign.” The SSE issued the work letter on March 27, and on April 1 the CSRC officially filed for investigation—only 5 days in total.

Even more striking is that the case-filing investigation and Dynasty Health’s lawsuit against the controlling shareholder happened on the same day. On April 1, Dynasty Health, as the plaintiff, brought the controlling shareholder Zhejiang Huayi Intelligent Manufacturing Co., Ltd., the persons acting in concert Huahan Investment, and the actual controller Chen Ayu to court together. The total amount involved was as high as RMB 478 million—this figure was 1.48 times Dynasty Health’s 2024 net profit attributable to shareholders.

The details disclosed in the complaint are even more chilling. The controlling shareholder and its related parties allegedly infringed on the company’s interests through two modes: first, a loan-to-loan rollover mode, under which the controlling shareholder used the company’s loan-to-loan business; to date, it occupied RMB 72 million of Dynasty Health that had not been returned. Second, a factoring financing mode: the controlling shareholder applied to a bank for financing in the name of a supplier, and the funds ultimately flowed to the controlling shareholder and its designated account, totaling more than RMB 406 million. Yet these funds that had already been practically obtained by the controlling shareholder required Dynasty Health to assume payment obligations. Due to the maturity of some accounts payable, Dynasty Health had already actually assumed payment obligations to the bank exceeding RMB 63 million; its subsidiary Shunxi Company had also assumed payment obligations of more than RMB 54 million.

Behind this series of numbers lies an unsettling fact: the controlling shareholder may have viewed the listed company as its own “ATM,” while using the “surgical knife” to hollow out the listed company—hidden within complex financing arrangements and related-party transactions. These actions very likely had not undergone compliant approval procedures and had not fulfilled information disclosure obligations—this in turn confirms the CSRC’s stated reasons for case filing: “suspected violations of laws and regulations in information disclosure.” And it was precisely the regulator’s rapid intervention that brought these operations hidden in the dark to the surface within just a few days.

At the same time, the controlling shareholder and its persons acting in concert also saw their shares judicially frozen. All 8.107 million shares held by the actual controller, Chen Ayu, were frozen, accounting for 100% of the shares she/he holds. 3.163 million shares of Huayi Intelligent Manufacturing were frozen, and 8.4 million shares of Huahan Investment were frozen. Although these frozen shares represent only about 14.69% of the combined shareholding of the controlling shareholder and its persons acting in concert, the actual controller’s holdings were “completely wiped out,” sending an unmistakable signal: this crisis is not merely an accounting problem, but a concrete legal dispute.

** The bizarre disappearance of RMB 100 million: the “first domino” under the regulator’s risk radar lock**

On March 27, an announcement became the key “first domino” that helped topple this crisis.

That day, Dynasty Health disclosed an astonishing piece of news: its controlling subsidiary Xitu Technology Co., Ltd. (hereinafter referred to as “Xitu Technology”) had its bank account funds illegally diverted by internal personnel taking advantage of their positions, with a cumulative amount as high as RMB 100 million.

Note: this was not misappropriation, and not occupation—it was an “illegal diversion.” In plain terms, someone took the company’s money and “moved it out directly.” Dynasty Health had applied to the public security authorities for filing and investigation on March 26, meaning this was no longer an internal dispute within the company, but a “case” that had entered the criminal investigation process.

It is also worth noting that Dynasty Health placed protective freezes on the potentially involved bank accounts, with a freeze amount of about RMB 900 million. RMB 100 million was diverted, and RMB 900 million was frozen. The total amount involved in the case and freeze exceeded RMB 1 billion. What does this number mean? It accounts for 26.54% of Dynasty Health’s most recently audited net assets, and 42.69% of monetary funds—put another way, more than 40% of the cash on Dynasty Health’s books has either disappeared or has been locked up and cannot be used.

This incident—seemingly an isolated event involving funds diverted from a subsidiary—might have been handled as an “incidental case.” But the regulator’s risk radar was far more sensitive than anyone expected. On the very same day the announcement was issued, the SSE’s regulatory work letter had already been delivered to Dynasty Health. The matters involved included the listed company itself, directors and senior executives, as well as the controlling shareholder and the de facto controller.

It was precisely this regulatory work letter that became the “fuse” that ignited a subsequent series of events. Under strong regulatory pressure, Dynasty Health was forced to conduct an internal self-examination. As the self-examination deepened, the controlling shareholder’s long-term occupation of funds from the listed company gradually came into view. From March 27 to April 1, in just a few days, a network of benefit encroachment involving nearly RMB 500 million was uncovered layer by layer.

The CSRC’s follow-up speed also made it clear to see the regulator’s determination of “zero tolerance.” While Dynasty Health was still conducting internal self-examination, the CSRC had already initiated investigation procedures in parallel. The SSE issued the work letter on March 27, and the CSRC formally filed for investigation on April 1—so fast and so tightly linked, it formed a seamless regulatory chain. From routine supervision by the exchange to case-filing investigation by the CSRC, the two levels of regulatory authorities completed a seamless handoff in just 5 days, which is extremely rare in prior A-share regulatory practices.

** Beneath the iceberg: “internal disgrace exposed to the outside” forced by high regulatory pressure**

If the diversion of subsidiary funds was an “accident,” then the controlling shareholder’s funds占用 was a “long-standing accumulation of problems.” And it was the forced mechanism under high regulatory pressure that made these “accumulated problems” public.

Under the prompt of the regulatory work letter, Dynasty Health, through self-examination, finally brought these “internal disgrace” to public attention. As of the disclosure date of the April 1 announcement, the balance of non-operating funds占用 by the controlling shareholder and its related parties totaled RMB 190 million. This amount exceeded the absolute value of 5% of Dynasty Health’s most recently audited net assets, thereby triggering the hard conditions for “other risk warnings” (i.e., ST).

The rules are spelled out clearly: if the controlling shareholder and its related parties fail to complete repayment or rectification within one month, the company’s stock will be subject to other risk warnings. The one-month countdown has already begun, leaving Dynasty Health little time. And this result was produced because, under strong regulatory intervention, the company was forced to conduct a self “health check.” Without the regulatory work letter’s prompt, these funds占用 issues might have continued to be hidden behind complex transaction structures, and no one would have known when they would be exposed.

But this is not all. The announcement also includes an “unfinished statement”: in addition to non-operating funds占用, the controlling shareholder and its related parties also had instances of providing guarantees to the company in violation of procedures without approval. The specific amount has not yet been disclosed; it only states “subject to the amount determined by further investigation by the company and the final determination by the regulatory authorities.” This means the RMB 190 million funds occupation currently exposed may not be the whole amount, and the actual figures may change.

Audit risks also exist. The announcement clearly warns that if, due to this incident, the audit institution issues non-unqualified opinions regarding the effectiveness of internal control over financial reporting of the company as of December 31, 2025, and/or the company’s 2025 annual audit report, then the company’s stock may be subject to other risk warnings or delisting risk warnings after the disclosure of the 2025 annual report. That is to say, besides the ST risk within one month, there is an even heavier “Sword of Damocles” hanging over Dynasty Health’s head.

Looking back at Dynasty Health’s performance in recent years, in 2024 the company’s operating revenue was RMB 8.729 billion, a slight year-on-year increase of 0.59%, but its net profit attributable to shareholders was only RMB 322 million, a sharp year-on-year drop of 24.84%. Operating cash flow also fell sharply from RMB 1.253 billion to RMB 787 million, down 37.23%. While the core business is still operating, cracks in internal governance have spread to financial performance. Now, combined with multiple negative factors such as the controlling shareholder’s hollowing-out, the CSRC’s case-filing, and judicial freezes, the situation is indeed challenging.

From a more macro perspective, Dynasty Health’s predicament is not an isolated case, but the regulator’s response speed has set a new record. The newly issued “Nine-Point Guidelines on Strict Governance of Listed Companies” in 2024 and its supporting measures explicitly require “promoting listed companies to enhance their investment value,” strengthen oversight of cash dividends, link dividends with reductions, and implement ST arrangements if dividend targets are not met. At the same time, regulators continue to step up enforcement against behaviors such as funds occupation, illegal guarantees, and violations in information disclosure. Since the beginning of this year, multiple listed companies have been subject to risk warnings or case-filing investigations due to issues such as controlling shareholder funds占用. But cases like Dynasty Health—where it took only 5 days from issue exposure to case-filing investigation—are still extremely rare.

The regulator’s “tightening spell” is closing at an unprecedented pace. Any attempt to encroach on the interests of listed companies through complex arrangements will face increasingly stringent accountability. The March 27 regulatory work letter and the April 1 case-filing investigation form a “combination punch.” With its speed and force, it sends a clear signal to the market: for any behavior that harms the interests of a listed company, the regulator will never delay even a moment.

For Dynasty Health, this crisis—triggered by the regulatory work letter and pushed to its peak by the case-filing investigation—is both a painful process of “internal disgrace exposed to the outside” and a test of survival. It is not common in A-share history for a listed company to proactively sue its controlling shareholder. To some extent, it also shows that under high regulatory pressure, the company’s management had no choice but to cut ties with problematic shareholders and commit to protecting the interests of the listed company. But the reality in front of them is harsh: how easy is it to repay RMB 190 million of funds occupation within one month? And whether audit report risks can be resolved is also an unanswered question.

(Source: 21st Century Business Herald)