After the successful reorganization, does Shandong Oriental Ocean Sci-tech (002086.SZ) have no "hidden worries" at all?

ong Oriental Ocean Sci-tech Although the issues of Oriental Ocean Sci-tech have been completely resolved, the company is actually still in a state of confusion without a real controller.In August 2023, Shandong Oriental Ocean Sci-tech announced that the company had conducted elections for the seventh board of directors, and disclosed that the company had no controlling shareholder and no actual controlling person. However, after the restructuring was completed, the stocks were transferred to the accounts of the restructuring investors on February 7, 2024. The company announced a simplified equity change notice, with Minmetals Jintong becoming the company's largest shareholder with a 18.26% stake, and Guoyuan Fund becoming the second largest shareholder with a 10.81% stake, still disclosing the status of having no actual controlling person. According to the company's announcement, Minmetals Jintong acquired company shares at 0.5 yuan per share and became the largest shareholder of the company as a strategic investor. The cost of acquiring the chips and the market price had a huge difference, providing a significant arbitrage opportunity. However, Minmetals Jintong was unwilling to take on the responsibilities of a major shareholder, leaving the company in a state of no actual control, which is a significant issue worthy of deep consideration. Does the Car family care about the seat when Minmetals is indifferent? It is noteworthy that, after the restructuring was completed for nearly five months, except for Minmetals Jintong, other restructuring investors did not obtain seats on the board of directors. According to Choice data from East Fortune, Shandong Oriental Ocean Sci-tech currently has 9 directors and independent directors, namely Huang Zhihua, Che Zhiyuan, Sun Haibin, Tang Jiyu, Wang Shuai, Wu Jun, Li Jiaqiang, Yujiang, and Xu Jingxi. Among them, Huang Zhihua and Wu Jun entered the company's management team when Minmetals Jintong initiated the restructuring of Dongyang in 2022. Both of them had also served as executives at Sichuan Western Resources Holdings Co., Ltd. Minmetals Jintong was the leader in Western Resources' restructuring, indicating that they were acting as agents for Minmetals Jintong. Che Zhiyuan, Tang Jiyu, and others had previously served as executives at the original Shandong Oriental Ocean, Su Haibin was an employee of Oriental Ocean, and Li Jiaqiang and Xu Jingxi were originally independent directors of the company. From the above structure, the original controlling shareholder, the Car family, still controlled 5 seats (3 non-independent directors, 2 independent directors). This means that despite fundamental changes in the shareholding structure, with Minmetals Jintong taking over as the largest shareholder, the company has not yet initiated the process of board of directors reorganization, and apart from themselves, none of the other restructuring investors have obtained seats on the board. Interestingly, during the restructuring period, the former largest shareholder, Hunan Youhe, had repeatedly questioned in writings whether Minmetals Jintong had colluded with the former controlling shareholder, the Car family, to obstruct other shareholders from entering the board of directors. It now appears that these speculations may not be entirely unfounded. In the board resolution that added the interim resolution, the two directors appointed by Minmetals both voted in favor, aligning with the actions of the former shareholder directors, confirming the earlier speculations. The controversial amendments to the Company's Articles of Association at the newly added shareholders' meeting mainly focused on three aspects. Including the early change of the board of directors/supervisory board in the special resolution matters, significantly increasing the difficulty of board turnover in the context of dispersed equity. At the same time, the "abolition" of the cumulative voting system for director/supervisor elections aims to strengthen the advantages of major shareholders in election matters. Finally, the addition of a clause on employee directors, with the election of employee directors not requiring shareholder approval, but rather being determined by methods like the employees' representative congress, objectively arranging for the "internal promotion" of Oriental Ocean. The above institutional arrangements clearly aim to maintain the existing board structure, effectively excluding other shareholders from participating in the company's management rights. Whether this will trigger strong backlash from other shareholders and attract attention from regulatory authorities remains to be seen. After the successful restructuring, the company's shareholding structure has fundamentally changed, and the overall turnover of the board of directors is in line with normal commercial logic. Most of the companies that have completed the restructuring while Oriental Ocean was completing it have also completed the overall turnover of the board of directors. However, Minmetals Jintong, the restructuring investor, has chosen to continue with the previous board members, going against the conventional practice. Since the completion of the restructuring, Oriental Ocean's stock price has continued to decline, with a 50% drop in operating performance in the first quarter of this year. The management history of the board of directors and the recent operating performance may not satisfy the restructuring investors and small shareholders of Oriental Ocean. Can the current board of directors, controlled by the former shareholders, lead Oriental Ocean's business back on track and regain the confidence of shareholders? In companies with no actual controlling person, the members of the board of directors can mutually control each other, thus achieving a relatively fair and transparent corporate management. Therefore, for Shandong Oriental Ocean Sci-tech, if they truly want to revitalize and succeed, they may first need to address the situation of "no actual controlling person" and the "chaotic and disordered board of directors," and then achieve truly fair and transparent corporate management. Fundamentals of the company: Who has imagination? Who is dragging their feet? Shandong Oriental Ocean Sci-tech was established in 2001 and went public on the Shenzhen Stock Exchange in 2006. It started with aquatic breeding and gradually developed into a comprehensive innovative enterprise with a marine division and a health division. It is understood that the company is mainly engaged in the breeding and farming of marine seedlings, processing of aquatic products, biotechnology, bonded warehousing and logistics, as well as the research, development, production, and sales of in vitro diagnostic reagents and testing services. In the first half of 2023, the company continued to promote the common development of marine and health industries, accelerating the transformation and upgrading of the company's industries, and achieving sustainable development through the dual-drive of enterprise and technological innovation. In conjunction with the financial report, since entering bankruptcy restructuring, the business structure of *ST Dong has begun to optimize rapidly - the proportion of low-margin marine aquaculture and aquatic processing businesses has decreased, while the high-margin in vitro diagnostic reagent business has rapidly risen, revitalizing the company with new growth dynamics. In 2023, Shandong Oriental Ocean Sci-tech's marine aquaculture business generated revenue of 88.0963 million yuan, a year-on-year decrease of 14.95%, accounting for 20.15% of total revenue, a slight increase compared to the same period in 2022; aquatic products addedRevenue from equipment sales reached 12928.01 million yuan, a decrease of 18.52% year-on-year, accounting for 29.57% of total revenue, which is higher than the proportion in the same period of 2022. Revenue from testing fees and reagents reached 19475.38 million yuan, a decrease of 41.44% year-on-year, accounting for 44.54% of total revenue. Although the proportion has dropped compared to the same period, it remains the company's main source of income.(Data source: Shandong Oriental Ocean Sci-tech financial report) In the reorganization and investment operation plan, Shandong Oriental Ocean Sci-tech stated: it aims to make the existing marine sector practical, refined, and strong; continue to deepen and vigorously develop the precision medical industry, with a focus on digitization, precision, and high-end orientation, and develop and strengthen the medical health industry through external mergers and acquisitions as well as internal growth; to create a high-tech leading enterprise in the marine and medical health dual main industry with dual drive and sustainable operation. It is not difficult to see from the strategic layout of Shandong Oriental Ocean Sci-tech - in the short term, the marine industry is for volume, and the in vitro diagnostic reagents business is for profit; in the long term, there is an opportunity to optimize the structure and expand the in vitro diagnostic reagents. These actions undoubtedly highlight the accuracy of Shandong Oriental Ocean Sci-tech's strategic layout and the efficiency of its execution. In the marine business, Shandong Oriental Ocean Sci-tech has accumulated a certain competitive advantage. Specifically, the company is a national aquatic seed farm, with multiple national research and development platforms such as the National Kelp and Sea Cucumber Engineering Technology Research Center, the Ministry of Agriculture's Seaweed Genetic Breeding Center, and the National and Local Joint Engineering Laboratory for the Breeding and Ecological Aquaculture of Sea Treasures, with comprehensive core competitive advantages in resources, technology, research, talent, scale, quality control, and brand. In the field of in vitro diagnostic reagents, Shandong Oriental Ocean Sci-tech is expected to tap into the industry's development dividends. It is reported that in recent years, in vitro diagnostics is one of the fastest-growing and most active sub-industries in the medical industry. It has gradually become a mature industry on a significant scale globally. According to Sullivan data, the size of China's in vitro diagnostic market in 2021 was 124.3 billion yuan, with a compound annual growth rate of 15.62% from 2016 to 2021. In the future, with the overall strengthening of the country's strength, the improvement of the national living standard, the deepening of the aging population, and the government's increasing support for the medical field, the size of China's in vitro diagnostic market will grow rapidly. Conclusion It is well known that the reorganization of a company is a multi-interest game. Some want to reduce losses, some want to extend life, some want to maintain jobs, some want to save people from fire and water and keep the business in the local area, some want industrial synergy and integration, while others seek profit amid difficulties. In the "chaotic" capital situation of Shandong Oriental Ocean Sci-tech, who is stirring up the situation, who is greedy? Who wants to profit even in difficult situations, who wants to keep the business in the local area? All is clear. But undoubtedly, in this chaotic situation, small and medium shareholders are the most "injured". Therefore, for Shandong Oriental Ocean Sci-tech, if it wants to achieve the policy target of "protecting the legitimate rights and interests of small and medium investors," "reinvigorating" is just the first step. In the future, as the company achieves truly fair and transparent management, continuously improves the fundamentals, the "spring" for small and medium shareholders of Shandong Oriental Ocean Sci-tech will undoubtedly come quietly.