Feisu Innovation receives a written warning for IPO violations: paid out 200 million in dividends before filing, with the broker advising cautious subscription.

Ask AI · Where does the root cause of rapid innovation internal control deficiencies lie?

“Port Harbor Business Observation” Wang Lu

On the road to going public, from July 2022 to now, Shenzhen Rapid Innovation Technology Co., Ltd. (hereinafter referred to as Rapid Innovation; 03355.HK) has spent three and a half years.

From rushing to A-shares to Hong Kong stocks, Rapid Innovation is finally about to land on the capital market.

1

IPO process involved violations and was issued a written warning

On March 13, Rapid Innovation disclosed a listing announcement on the Hong Kong Stock Exchange, with the public offering from March 13 to March 18, and expected to list on the main board of HKEX on March 23, 2026.

The offering price for this IPO is between HKD 35.2 and HKD 41.6 per share, with a global offering of 40 million H-shares, accounting for 10% of the total shares after issuance, plus an over-allotment option of 15%. The total fundraising amount is approximately HKD 1.408 billion to HKD 1.664 billion (assuming the over-allotment is not exercised).

According to the prospectus and Tianyancha, Rapid Innovation was established in April 2009. The company is engaged in R&D, design, and sales of core equipment and general accessories in the network communication field. It has developed over 80,000 SKUs of core devices and accessories, including optical modules and high-speed cables, network equipment, fiber jumpers and tail fibers, fiber management products, optical transmission equipment, copper cabling systems, testing instruments, and tools.

The journey to listing has been quite bumpy for Rapid Innovation.

On July 5, 2022, the company submitted its application to the Shenzhen Stock Exchange Main Board, sponsored by China Merchants Securities. After two rounds of inquiry, the company voluntarily withdrew the application in May 2024, and the A-share IPO failed to proceed within two years.

However, even after withdrawal, on January 10 this year, the Shenzhen Stock Exchange disclosed three regulatory letters involving violations during the IPO application process.

According to onsite supervision by the Shenzhen Stock Exchange, first, Rapid Innovation’s internal controls related to information systems are defective, failing to accurately display sales and review data of front-end mall products; second, the company only started fully saving system operation logs within six months from June 2023, which is inconsistent with the responses to inquiries; third, the company has not established internal management systems for anti-reversal accounting and review, and employees with access to financial systems can perform anti-reversal and anti-review operations without approval, indicating internal control flaws in the company’s financial systems, with responses to inquiries inconsistent with actual conditions.

As the primary responsible party for information disclosure, Rapid Innovation failed to ensure the truthfulness, accuracy, and completeness of the issuance and listing application documents and disclosures. The above situations violate relevant regulations. Meanwhile, the actual controller, Chairman, and General Manager Xiang Wei of Rapid Innovation violated the obligation of honesty and trustworthiness, failed to supervise the establishment of sound internal control systems, and did not ensure the truthfulness, accuracy, and completeness of the prospectus and other filing documents and disclosures, bearing significant responsibility for the violations.

Based on the provisions of Rules for the Review of Issuance and Listing (Article 72 and the third item of Article 74), the Shenzhen Stock Exchange’s Listing Review Center decided to issue a written warning to Shenzhen Rapid Innovation Technology Co., Ltd. and Xiang Wei as self-regulatory measures. The project sponsor, China Merchants Securities, and sponsoring representatives Yang Meng and Liu Xingde, were also subject to written warnings.

The project auditors, Deloitte Hua Yong and the signing certified public accountants Fang Shaofan and Lin Xiqian, received written warnings as well.

For this Hong Kong listing, Rapid Innovation’s joint sponsors are China International Capital Corporation, CITIC Securities International, and China Merchants Securities International, forming a prestigious lineup.

2

Before submitting, paid out HKD 200 million in dividends; brokers advise caution in subscribing

Financial data from 2022 to 2024 and the first three quarters of 2025 (within the reporting period): the company achieved revenues of RMB 1.988 billion, RMB 2.213 billion, RMB 2.612 billion, and RMB 2.175 billion, respectively; net profits of RMB 365 million, RMB 457 million, RMB 397 million, and RMB 423 million; adjusted net profits of RMB 388 million, RMB 470 million, RMB 408 million, and RMB 461 million; net profit margins of 18.3%, 20.6%, 15.2%, and 19.5%; gross profit margins of 45.4%, 49.4%, 50%, and 52.6%. Overall, except for a dip in net profit in 2024, core indicators have continued to improve.

In 2025, Rapid Innovation’s revenue is projected at RMB 2.966 billion, up 13.55%, with net profit of RMB 601 million, up 51.4%.

Regarding costs, during the reporting period, sales and distribution expenses were RMB 271 million, RMB 339 million, RMB 488 million, and RMB 390 million, accounting for 13.6%, 15.3%, 18.7%, and 17.9% of total revenue; general and administrative expenses were RMB 170 million, RMB 175 million, RMB 210 million, and RMB 162 million, accounting for 8.6%, 7.9%, 8.0%, and 7.4%; R&D expenses were RMB 99.82 million, RMB 110 million, RMB 144 million, and RMB 124 million, accounting for 5.0%, 5.0%, 5.5%, and 5.7%.

The company states that the funds raised will be used for R&D, including product development and strengthening full-stack technology platforms; enhancing delivery capacity in major overseas markets; digitalization of network solutions and service business platforms; and for working capital and general corporate purposes.

In the A-share IPO prospectus, Rapid Innovation planned to raise RMB 1.354 billion, with RMB 574 million for the construction of an intelligent network communication equipment industrial park, RMB 281 million for upgrading internet platform and operation centers, RMB 98.51 million for internal management information system upgrades, and RMB 400 million for supplementary working capital.

While expecting billions in additional funding, the company’s practice of paying dividends while raising funds has also raised questions.

Five days before the Hong Kong listing application, on May 22, 2025, Rapid Innovation held a shareholders’ meeting, approving the 2024 cash dividend plan, which would pay existing shareholders RMB 5.56 per 10 unlisted shares. The prospectus shows the company’s share capital is 360 million shares, meaning the total dividend payout is RMB 200 million, accounting for 50.38% of 2024 net profit.

The prospectus indicates that Xiang Wei holds 56.65% of the company’s shares and indirectly controls an additional 4.51% through Yuxuan Wenzhan, Yuxuan Jincheng, and Yuxuan Cheng, totaling 61.16% voting rights, making him the controlling shareholder. This means Xiang Wei’s dividend payout exceeds RMB 100 million.

Earlier, Rapid Innovation paid RMB 60 million in dividends in 2022 and RMB 90 million in 2020.

Notably, Guoyuan International Securities recently issued a research report on Rapid Innovation’s prospects, stating that after listing, the company’s market value is estimated at HKD 16.6 billion, with an IPO price corresponding to an adjusted 2025 net profit multiple of about 28.0X, which is reasonable. However, since core technology relies on imported chips and outsourced manufacturing, they advise cautious subscription. (Produced by Port Harbor Finance)