Subsidiary’s hundreds of millions in funds mysteriously disappear, and Shilinmen’s corporate governance faces scrutiny

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Source: China Business Journal

Zhongjing reporter Guo Yangqing and Shi Yingjing, reporting from Shanghai

A well-known furniture company nicknamed “China’s No. 1 mattress company”—Joyful Sleep Health Sleep Technology Co., Ltd. (hereinafter referred to as “Joyful Sleep,” 603008.SH)—is mired in a controversy over the illegal transfer of funds.

According to an announcement by Joyful Sleep, the 100 million yuan of funds of its controlling subsidiary, Joytu Technology Co., Ltd. (hereinafter referred to as “Joytu Technology”), were illegally transferred by insiders by taking advantage of their positions. As a result, Joyful Sleep urgently froze relevant accounts totaling 900 million yuan. The total amount of funds involved and frozen is about 1 billion yuan, representing 26.54% of the company’s most recent audited net assets and 42.69% of monetary funds, respectively.

How will the issue of Joytu Technology’s transfer of funds be resolved? On March 31, a staff member from Joyful Sleep’s securities department told a reporter after the reporter placed a call to Joyful Sleep and sent an interview letter: “At present, the public security authorities are conducting an investigation within Joyful Sleep. (The case of Joytu Technology) still has no further clear information. If there are any developments, we will release an announcement at the first time.”

On the evening of April 1, Joyful Sleep issued multiple announcements and disclosed that the CSRC has simultaneously filed for investigation into the company and its actual controller, Chen Ayu; the board of directors passed a lawsuit proposal by a vote of 6:0, filed for counter-suit to recover nearly 478 million yuan from the controlling shareholder, and brought the controlling shareholder and Chen Ayu to court. At the same time, all shares held by Chen Ayu have been fully frozen.

The shockwave triggered by this bizarre incident of fund transfer is rapidly spreading, and Joyful Sleep’s corporate governance approach is also being put to deep scrutiny.

About 1 billion yuan in funds involved and frozen

Joytu Technology is the core strategic platform for Joyful Sleep’s hotel engineering channel layout and is also the only entity for developing and operating this channel.

The announcement shows that recently, Joyful Sleep found that funds in Joytu Technology’s bank accounts were illegally transferred. The cumulative amount transferred is 100 million yuan. Relevant personnel are suspected of illegally misappropriating company funds by taking advantage of their positions. To further prevent risks to fund safety and ensure the safety of the listed company’s funds, Joyful Sleep applied to the public security authorities for filing and investigation on March 26.

The reporter learned that Joyful Sleep would place protective freezes on the related bank accounts that may be involved, with account holders being Hangzhou Xiyue Furniture Sales Co., Ltd. and Shaoxing Xinxi Furniture Sales Co., Ltd., and the total frozen amount is about 900 million yuan.

Joyful Sleep explained that the freezing of the above bank accounts is a protective freeze that Joyful Sleep proactively initiated to protect the safety of funds, and there is no circumstance of being frozen by a third party. This matter may cause certain impacts on Joytu Technology’s normal use of funds in the short term, but considering the company’s cash flow situation as a whole, it will temporarily not constitute a material adverse impact on the company’s overall production and operations. “Our company is currently fully cooperating with the public security authorities to investigate and verify the relevant matters. Under the premise of ensuring the safety of the funds in the accounts, we will advance the unfreezing of frozen accounts, and will do our utmost to recover the illegally transferred funds.”

Relevant materials show that the core entity from which the funds were illegally misappropriated in this case, Joytu Technology, is a wholly-owned subsidiary established by Joyful Sleep in January 2021. The registered capital is 50 million yuan, and its registered place is located in Xiaoshan District, Hangzhou, Zhejiang Province.

Joytu Technology is the core strategic platform for Joyful Sleep’s hotel engineering channel layout and is also the only entity for developing and operating this channel. Public information shows that Joyful Sleep’s hotel engineering channel has entered brands controlled by InterContinental Hotels (IHG.N), Marriott International (MAR.O), Jinjiang Hotels (600754.SH), Huazhu (HTHT.O), Capital Hotel (600258.SH), East Group, Shangmei, Atour (ATAT.O), Kaiyuan Hotel Group, and Junting Hotel Group, including the Junlan Resort. The number of cooperative hotels exceeds 3,000, making it an important business growth point for the company.

However, according to 2024 business and industrial information, Joytu Technology has only 8 employees. But Joytu Technology holds more than 100 million yuan in monetary funds on its books, accounting for nearly 20% of the total monetary funds of all of Joyful Sleep’s subsidiaries. Joyful Sleep’s 2025 semi-annual report shows that monetary funds in the consolidated statements are 1.972 billion yuan, with the parent company holding 1.444 billion yuan, and all subsidiaries combined holding approximately 530 million yuan in cash.

In response, the above-mentioned staff member from Joyful Sleep’s securities department said: “All these (situations) are still under further investigation. We have not been exposed to more information at present.”

It is understood that after the illegal transfer of funds incident occurred, Joyful Sleep quickly carried out a self-audit of fund safety, strengthened its fund safety management and control system, and has established communication channels with the relevant parties. It is actively negotiating the return of the transferred funds. The company will actively cooperate with the public security authorities to carry out investigation and case handling, recover the transferred funds as soon as possible, eliminate any unsafe factors related to the funds in Joyful Sleep’s accounts, and ensure the safety of the company’s property.

Joyful Sleep stated that within the company, it will carry out accountability for personnel and internal control rectification, strengthen all directors and senior management personnel as well as personnel in key positions to study laws and regulations, improve awareness of standardized operations, and effectively enhance the company’s corporate governance and internal control management capabilities, while strengthening the construction and implementation of internal control systems.

Taking the founder to court

Chen Ayu, Huayi Intelligent Manufacturing, and Hanhai Investment’s conduct of obtaining funds has seriously harmed Joyful Sleep’s interests; therefore, a lawsuit was promptly filed.

Relevant materials show that Chen Ayu was born in April 1962 in Shaoxing, Zhejiang Province. In 1984, at the age of 22, he founded a small furniture workshop in Shaoxing with a principal of 1,000 yuan. At that time, in China, hard-board beds and coir/spring-strap beds were the main products. “Simmons” (spring mattresses) had just entered China. Based on his judgment that “Simmons” would become a major future trend, he gradually shifted toward the mattress sector. In 1988, Chen Ayu formally registered the “Joyful Sleep” trademark, meaning “joy ushers at the doorstep, and good sleep keeps company.”

Entering the 1990s, Joyful Sleep gradually developed and grew, and began to operate in a corporate manner. In 2012, Joyful Sleep became the first A-share listed company in the China mattress industry.

It is understood that Joyful Sleep exhibits typical characteristics of family-controlled ownership and concentrated equity. The founder, Chen Ayu, is the company’s actual controller. Together with his children, Chen Yicheng and Chen Pingqi, they act in concert. Through direct shareholding and two major controlling platforms—Zhejiang Huayi Intelligent Manufacturing Co., Ltd. (hereinafter referred to as “Huayi Intelligent Manufacturing”) and Shaoxing Yuecheng Huahan Equity Investment Partnership (Limited Partnership) (hereinafter referred to as “Huahan Investment”)—they jointly control the company with a shareholding ratio of over 35%. Among them, Huayi Intelligent Manufacturing is also the controlling shareholder of Joyful Sleep.

More than 10 years after listing, Joyful Sleep ultimately chose to take Chen Ayu to court. On March 31, 2026, Joyful Sleep received the “Notice of Case Acceptance” issued by the People’s Court of Yuecheng District, Shaoxing. Joyful Sleep and its two wholly-owned subsidiaries brought a lawsuit against Chen Ayu, Huayi Intelligent Manufacturing, and Huahan Investment for disputes over liability for damage to company interests.

In the announcement, Joyful Sleep restored the facts and the timeline of events. In 2026, Joyful Sleep borrowed loans from banks for business needs. Chen Ayu and its related parties used a business model of loan refinancing and relending through Joyful Sleep’s loan arrangement, and to date have occupied 72 million yuan of Joyful Sleep’s funds without repayment.

In addition, in 2025–2026, Joyful Sleep carried out factoring financing businesses. For amounts already paid by Joyful Sleep to suppliers, Chen Ayu’s side, through the factoring financing business model, applied for financing from banks in the name of the suppliers. The funds ultimately flowed to Chen Ayu’s side and its designated accounts. According to preliminary understanding, Chen Ayu’s side obtained funds totaling about 406 million yuan in total. For the amounts that these suppliers applied to banks for financing and that the defendants actually obtained, Joyful Sleep assumes the payment obligation.

As introduced, due to the expiration of some accounts payable, Joyful Sleep and its wholly-owned subsidiaries have actually assumed payment obligations to banks of about 118 million yuan. Adding the 72 million yuan loan that has not been repaid, the balance of non-operating funds occupied by the controlling shareholder and its related parties totals 190 million yuan.

Joyful Sleep stated that Chen Ayu, Huayi Intelligent Manufacturing, and Huahan Investment’s conduct of obtaining funds has seriously harmed Joyful Sleep’s interests; therefore, the company promptly filed a lawsuit. “The company will also continue to maintain communication with the controlling shareholder and parties acting in concert, urge them to resolve the issue of fund occupation as soon as possible through methods such as repaying with cash, swapping assets, and reducing share holdings, and actively promote the progress of this litigation.”

It is worth noting that on the evening of April 1, Joyful Sleep released an announcement stating that, due to suspected violations of information disclosure regulations, Joyful Sleep and Chen Ayu both recently received the “Notice of Filing for Investigation” issued by the CSRC.

Renaming and transformation in pursuit of performance breakthroughs

“The main consideration behind the name change is that Joyful Sleep is currently promoting an overall transformation of its business strategy, and at this stage it particularly wants to develop in the direction of intelligence.”

As a traditional furniture manufacturer, Joyful Sleep’s performance in recent years has shown a trend of “increasing revenue without increasing profit.” The financial reports show that from 2020 to 2024, Joyful Sleep’s revenue scale gradually rose from 5.623 billion yuan to 8.729 billion yuan. Its net profit attributable to the parent company fluctuated markedly, at 313 million yuan, 559 million yuan, 238 million yuan, 429 million yuan, and 322 million yuan, respectively.

The latest financial report shows that in the third quarter of 2025, Joyful Sleep achieved operating revenue of 2.176 billion yuan, up 7.78% year over year; net profit was 133 million yuan, down 6.1% year over year. In the first three quarters of 2025, operating revenue was 6.196 billion yuan, up 3.68% year over year; net profit was 399 million yuan, up 6.45%.

Against this backdrop, Joyful Sleep is actively embracing AI and transitioning toward intelligence and technology. In January 2026, Joyful Sleep decided to change its Chinese name from “Joyful Sleep Furniture Co., Ltd.” to “Joyful Sleep Health Sleep Technology Co., Ltd.”

“The main consideration behind the name change is that Joyful Sleep is currently promoting an overall transformation of its business strategy, and at this stage it particularly wants to develop in the direction of intelligence.” The above-mentioned staff member from Joyful Sleep’s securities department said that Joyful Sleep’s product R&D is increasingly moving toward technology-based sleep products. The name change not only aligns with the company’s future development plan, but also with the overall trend in the industry.

The reporter learned that Joyful Sleep is firmly pushing forward its strategic transformation from a “traditional furniture manufacturer” to a “technology-based sleep solutions provider.”

As for the reasons, Joyful Sleep believes that on the one hand, users’ acceptance of intelligent functions is increasing. AI smart mattresses with capabilities for proactive intervention and adaptive regulation are the direction of future development, but they are currently still in the stage of technical startup and market education. On the other hand, AI mattresses are not simply “plug-in mattresses.” They involve an end-to-end integration of the entire chain, including hardware, software, algorithms, and new product standards, requiring long-term technical accumulation and continuous research and development investment. “As technology barriers continue to rise, the industry will accelerate its reshuffle; small and medium-sized manufacturers will gradually exit due to a lack of technological accumulation and resource integration capabilities, and leading companies will take a dominant position.”

As introduced, by strengthening the foundation of its mattress core business, Joyful Sleep has achieved breakthrough progress in the field of smart sleep. Based on its independently developed “three-stage sleep-assisting theory,” Joyful Sleep successfully upgraded key technology modules such as flexible air chambers and intelligent sleep monitoring systems, achieving breakthrough innovations including dynamic adjustment of mattress softness and firmness by zone and intelligent adaptation to the sleeping environment. Core technologies such as air springs and active sleep assistance have realized industrialized transformation.

Joyful Sleep stated that supported by its self-developed “air spring” technology as the core, the company has built the adaptive adjustment capability of its smart mattresses, forming a barrier of core patented technologies. As of the third quarter of 2025, the revenue share of Joyful Sleep’s electric intelligent home products exceeds 3%. As the scale expands, the company will gradually strengthen its control over the entire supply chain. To advance the pace of transformation, Joyful Sleep is also strengthening investment. Joyful Sleep stated that in the first three quarters of 2023, 2024, and 2025, the cash outflows from investment activities were mainly driven by expenditures related to newly added capacity layout and intelligent upgrades, specifically including investments in factory buildings and equipment in multiple production bases in regions such as Northern China, Jiangxi Province, and Henan Province, as well as expenditures for investment and construction of intelligent upgrade projects at the Henan base.

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