Xinde Technology shifts to Hong Kong stocks: Banned for 3 years due to bid-rigging, owes 55 million in social security contributions

Why Does AI · Xinde Technology’s Compliance Issues Repeatedly Hinder Its IPO Process?

Phoenix Finance “IPO Observation Post”

Since its first attempt to enter the A-share market in 2008, to the third IPO application being rejected by regulators in 2022, Shandong Xinde Technology Co., Ltd. (hereinafter referred to as “Xinde Technology”) has failed in its three attempts to access the capital market over nearly twenty years, repeatedly stumbling on compliance and internal control shortcomings.

Despite three failures, this Shandong company specializing in veterinary biological products has not given up on its path to capitalization. In February 2026, Xinde Technology officially turned to the Hong Kong Stock Exchange to submit a main board listing application, starting its fourth attempt at capital access.

While it may seem like a change of path to seek breakthroughs, the company’s past records of major violations and persistent internal control vulnerabilities have not been completely eradicated. These long-standing issues continue to overshadow this Hong Kong IPO journey, becoming a core obstacle in the listing process.

01 Three Failed Attempts at A-shares

Xinde Technology’s journey toward A-share capitalization can be described as bumpy, with three submissions and three rejections over more than a decade. Each failure was not coincidental, all pointing to insufficient compliance and significant flaws in operational management, which have created deep-seated risks for this shift to Hong Kong shares. Even changing the listing venue, the reasons for past failures remain unavoidable focal points in the review process.

In 2008, the company made its first attempt at an A-share IPO, which was directly rejected by the China Securities Regulatory Commission. In 2010, Xinde Technology submitted its second A-share IPO application, only to expose significant flaws at the equity level, with the share transfer price deviating abnormally from fair market value, leading regulators to suspect potential profit transfer and questioning the compliance of the equity structure, ultimately stopping again at the IPO review stage.

Years later, in 2022, Xinde Technology attempted its third push for A-shares, believing it could pass by addressing past shortcomings, only to have hopes dashed due to a serious bidding violation incident. The company was penalized with a three-year ban from participating in military procurement projects for colluding in bidding, which touched on the core compliance red line for companies planning to list. Regulators raised serious doubts about the company’s overall compliance governance capabilities, leading directly to the rejection of the third IPO.

In these three attempts at A-shares, issues escalated from product qualifications, equity compliance to major illegal activities, solidifying the company’s long-standing operational shortcoming of prioritizing business expansion over compliance management. Even with a shift to Hong Kong shares, these historical issues cannot simply be erased.

In addition to the continuous failures in IPOs, Xinde Technology has also faced a significant reduction in capital valuation, with market recognition continuously declining. After completing its Series B financing in 2021, the company’s valuation peaked at 2.878 billion yuan; however, by the time it completed its Series C financing in October 2025, the post-investment valuation had dropped to 1.8 billion yuan, a staggering 37.5% decrease in just four years, close to 40%. Even though the company’s revenue showed a short-term rebound in the first three quarters of 2025, reaching 877 million yuan, a year-on-year increase of 25.2%, it was unable to reverse the pessimistic expectations from the capital side, leading to a significant decline in valuation.

For this Hong Kong IPO, the company plans to raise funds for research and development, capacity expansion, overseas market development, and supplementing working capital, but the fundraising prospects are also shadowed by past capital failures and compliance issues.

02 Major Violations: Colluding in Military Procurement Leads to Three-Year Ban

Among the many compliance issues faced by Xinde Technology, the collusion in military procurement is the most serious and has the most immediate impact, serving as the core trigger for the rejection of its third A-share IPO. It is also a fatal flaw that cannot be avoided in the review process for this Hong Kong IPO, constituting a serious breach of trust that touches on industry regulatory red lines.

On April 23, 2022, the Procurement and Asset Management Bureau of the Air Force Logistics Department officially released a penalty announcement, confirming that Xinde Technology had engaged in serious violations of colluding in bidding during the inquiry procurement process for the 2021 animal husbandry epidemic prevention materials project (Project No.: 2021-JK01-W4131, budget amount: 1.4 million yuan). According to Article 32 and Article 39 of the “Regulations on the Management of Suppliers of Military Material Engineering Services,” regulatory authorities imposed a severe penalty on Xinde Technology, banning it from participating in military procurement activities for three years. Furthermore, the scope of punishment was expanded to include all related enterprises controlled and managed by the company’s legal representative and actual controller, Li Chaoyang, who were also banned from participating in military procurement for three years.

Li Chaoyang, legal representative and actual controller of Xinde Technology

This penalty not only caused direct business losses but also thoroughly exposed significant vulnerabilities in the company’s bidding management, operational integrity, and compliance risk control.

03 Performance “Cosmetics” through Subsidies, Compliance Issues with Arrears

If the military procurement collusion was a fatal major violation, then the frequent internal control vulnerabilities and compliance flaws in Xinde Technology’s daily operations expose the company’s long-standing compliance issues. Although seemingly scattered, they collectively reflect core problems of irregular governance and weak compliance awareness, further exacerbating the review risks for this Hong Kong IPO. More concerning is that the company relies on government subsidies to support its performance while simultaneously accumulating substantial arrears in employee social security and housing funds, highlighting a sharp contradiction between finance and compliance.

According to the prospectus, in 2023, 2024, and the first nine months of 2025, Xinde Technology achieved revenues of 985 million yuan, 982 million yuan, and 877 million yuan, respectively, with a slight year-on-year decline in revenue for 2024 and a year-on-year increase of 25.2% in revenue for the first three quarters of 2025; during the same period, net profits were 34.763 million yuan, 28.118 million yuan, and 55.671 million yuan.

In terms of profit structure, the company’s performance heavily depends on government subsidies, with a total of about 28.7 million yuan in government subsidies confirmed for the entire year of 2024, which nearly matches or slightly exceeds the net profit of 28.118 million yuan that year. After deducting government subsidies, the company’s core operating profit is almost negligible, indicating weak self-sustaining ability.

In stark contrast, the company has long been deficient in employee rights protection. During the report period from 2023 to September 2025, Xinde Technology has consistently failed to pay social insurance and housing funds in full for certain employees, with cumulative arrears reaching approximately 55 million yuan over three years. This includes 18.6 million yuan in 2023, 20.3 million yuan in 2024, and 16.1 million yuan in the first nine months of 2025, with the scale of arrears consistently remaining high.

The company also voluntarily admits in its prospectus that this behavior violates domestic labor and social security laws and regulations, facing risks of regulatory demands for back payments, late fees, or even administrative penalties. The total amount of arrears over three years far exceeds the net profit and government subsidy amount for the entire year of 2024. Maintaining reported profitability through government subsidies while ignoring employees’ legal rights and refusing to pay social security and housing funds adequately creates a stark contrast that not only directly squeezes the company’s profit margins but also reflects a typical internal control flaw of prioritizing reported performance over compliance responsibility and having extremely irregular internal management processes for a company planning to go public.

As a company with a certain industry foundation in the field of veterinary biological products in China, for Xinde Technology to truly establish itself in the capital market, simply changing the listing venue is not enough.