Feisu Innovation's IPO violation results in written warning: Distributed 200 million in dividends before filing, broker advises cautious subscription

On the road to its IPO, Shenzhen FS Technology Co., Ltd. (hereinafter referred to as FS Innovation; 03355.HK) has spent three and a half years from July 2022 to the present.

From attempting to list on the A-share market to now targeting Hong Kong stocks, FS Innovation is finally about to enter the capital markets.

The IPO process involved violations and received a written warning

On March 13, Feisu Innovation disclosed its offering announcement on the Hong Kong Stock Exchange. The company will conduct its IPO from March 13 to March 18 and is expected to be listed on the main board of the Hong Kong Stock Exchange on March 23, 2026.

Feisu Innovation's offering price for this IPO is between HKD 35.2 and HKD 41.6 per share. It plans to globally offer 40 million H-shares, accounting for 10% of the total shares after issuance, with an additional 15% over-allotment option. The total fundraising amount is approximately HKD 1.408 billion to HKD 1.664 billion (assuming the over-allotment option is not exercised).

According to the prospectus and Tianyancha, Feisu Innovation was founded in April 2009. The company engages in the research, design, and sales of core equipment and general accessories in the network communication field. It has developed more than 80,000 SKUs of core equipment and general accessories. Its main products include optical modules and high-speed cables, network devices, fiber optic patch cords and pigtails, fiber optic distribution management products, optical transmission equipment, copper cable integrated wiring products, test instruments, and tools.

On its path to going public, Feisu Innovation has faced significant challenges.

On July 5, 2022, Feisu Innovation filed for listing on the main board of the Shenzhen Stock Exchange, with China Merchants Securities as the sponsor. After two rounds of review inquiry letters, the company voluntarily withdrew its application in May 2024, marking the failure of its A-share IPO progress within less than two years.

However, even though it withdrew voluntarily, on January 10 this year, the Shenzhen Stock Exchange disclosed three regulatory letters related to violations during Feisu Innovation’s IPO application process.

According to on-site supervision by the Shenzhen Stock Exchange, it was found that:First, Feisu Innovation had internal control deficiencies related to its information systems, failing to accurately display product sales and review data on its front-end marketplace. Second, the company only started fully retaining system operation logs from June 2023 onward, and the responses to inquiries did not match the actual situation. Third, the company lacked internal management regulations for reversing account closures and re-auditing. Employees with financial system access could reverse account closures and re-audit without approval, reflecting internal control deficiencies in the financial system, and the responses to inquiries were inconsistent with the actual situation.

As the primary party responsible for information disclosure, Feisu Innovation failed to ensure the authenticity, accuracy, and completeness of the documents and information submitted for its listing application, violating relevant regulations. At the same time, Xiang Wei, the actual controller, chairman, and general manager of Feisu Innovation, violated his duty of integrity and failed to ensure the establishment of sound internal control systems or guarantee the truthfulness, accuracy, and completeness of the prospectus and other submitted documents and information disclosures, bearing significant responsibility for the aforementioned violations.

In accordance with Article 72 and Item 3 of Article 74 of the Review Rules, the Listing Review Center of the Shenzhen Stock Exchange has decided to impose self-regulatory measures in the form of written warnings on Shenzhen Fast Innovation Technology Co., Ltd. and Xiang Wei. The sponsor of the project, China Merchants Securities, along with sponsor representatives Yang Meng and Liu Xingde, have also been subjected to self-regulatory measures in the form of written warnings.

The project's reporting accountant, Deloitte Huayong, and the project's signing certified public accountants, Fang Shaofan and Lin Xiqian, have been subjected to self-regulatory measures in the form of written warnings.

For this Hong Kong listing, Fast Innovation’s joint sponsors are CICC, CITIC JianTou International, and China Merchants Securities International, a truly impressive lineup.

Dividend payout of 200 million before filing; broker advises cautious subscription.

In terms of financial data, for the years 2022 to 2024 and the first three quarters of 2025 (reporting period), the company achieved revenues of 1.988 billion yuan, 2.213 billion yuan, 2.612 billion yuan, and 2.175 billion yuan respectively, with net profits of 365 million yuan, 457 million yuan, 397 million yuan, and 423 million yuan respectively. Adjusted net profits were 388 million yuan, 470 million yuan, 408 million yuan, and 461 million yuan respectively. Net profit margins were 18.3%, 20.6%, 15.2%, and 19.5%, while gross margins were 45.4%, 49.4%, 50%, and 52.6% respectively. Overall, except for the decline in net profit in 2024, all core indicators showed continuous improvement.

In 2025, Fast Innovation generated revenue of 2.966 billion yuan, representing a year-on-year increase of 13.55%, and net profit of 601 million yuan, reflecting a year-on-year growth of 51.4%.

In terms of cost expenditures during the reporting period, the company's sales and distribution expenses were 271 million yuan, 339 million yuan, 488 million yuan, and 390 million yuan, accounting for 13.6%, 15.3%, 18.7%, and 17.9% of total revenue respectively. General and administrative expenses were 170 million yuan, 175 million yuan, 210 million yuan, and 162 million yuan, accounting for 8.6%, 7.9%, 8.0%, and 7.4% of total revenue respectively. Research and development expenses were 99.824 million yuan, 110 million yuan, 144 million yuan, and 124 million yuan, representing 5.0%, 5.0%, 5.5%, and 5.7% of total revenue respectively.

Regarding the use of proceeds from this fundraising, the company stated that the funds will be used for research and development, including product development and enhancement of the full-stack technology platform; improving the company’s delivery capabilities in key overseas markets; digitizing the company’s network solutions and service business platforms; and serving as working capital and for general corporate purposes.

In its A-share IPO prospectus, Fast Innovation plans to raise 1.354 billion yuan, of which 574 million yuan will be allocated to the construction of an intelligent industrial park for network communication equipment, 281 million yuan for upgrading the Internet platform and operations center construction project, 98.591 million yuan for internal management information system upgrades, and 400 million yuan to replenish working capital.

While hoping for billions in supplementary funding, the company’s simultaneous dividend payouts and fundraising efforts have also raised questions.

Five days before the Hong Kong listing application, on May 22, 2025, Feisu Innovation held its annual general meeting, where it reviewed and approved the 2024 cash dividend distribution plan. The company will distribute a cash dividend of RMB 5.56 per 10 unlisted shares to existing shareholders. According to the prospectus, Feisu Innovation’s share capital is 360 million shares, which means that the total amount of this cash dividend is RMB 200 million, accounting for 50.38% of the net profit in 2024.

The prospectus shows that Xiang Wei holds 56.65% of the company's equity and indirectly controls 4.51% of the company’s equity through Yuxuan Wenjian, Yuxuan Jincheng, and Yuxuan Chengzhang, giving him control of 61.16% of Feisu Innovation’s voting rights as the controlling shareholder. In other words, Xiang Wei's share of this dividend exceeds RMB 100 million.

Earlier, Feisu Innovation distributed dividends of RMB 60 million in 2022 and RMB 90 million in 2020.

Notably, regarding Feisu Innovation's listing prospects, a recent research report issued by Guoyuan International Securities pointed out that after the company goes public, its market value will be approximately HKD 16.6 billion. The offer price corresponds to about 28.0 times the adjusted net profit for 2025, suggesting a reasonable valuation. However, given that its core technology relies on externally purchased chips and outsourced production, the report recommends cautious subscription.(Produced by Harbor Finance)

Harbor Business Observer - Wang Lu

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