Recently, Wanda Group, which is in a critical stage of going public, is facing challenges. Tianyancha, a business information app in China, shows that Zhuhai Wanda Commercial Management Group has recently added two pieces of equity freeze information. The executed party is Dalian Wanda Commercial Management Group, with frozen equity amounts of RMB 5.072 billion and RMB 100 million respectively. The freezing period is from July 4, 2023, to July 3, 2026, and from July 5, 2023, to July 4, 2026. The frequent freezing of equity in Wanda Commercial Management not only reflects the increasing economic disputes between Wanda and other companies but also indicates the emerging debt issues faced by Zhuhai Wanda, before its listing. This demonstrates the current challenging situation of the enterprise.
Dalian Wanda is one of China's largest commercial real estate developers and operators, while Wanda Commercial Management is one of its core assets. At the end of June this year, according to documents submitted to the Hong Kong Stock Exchange, Zhuhai Wanda Commercial Management Group Co., Ltd. filed an IPO application. According to the latest version of the prospectus, in 2022, Wanda Commercial Management achieved revenues of approximately RMB 27.12 billion, gross profit of approximately RMB 12.984 billion, pre-tax net profit of approximately RMB 9.303 billion, and net profit attributable to shareholders of approximately RMB 7.503 billion. If it fails to successfully go public by the end of 2023, Wanda Commercial Management Group will need to pay approximately RMB 30 billion to repurchase the shares from pre-IPO investors. As Zhuhai Wanda's listing approval has been delayed, this potential debt issue could become a new risk for Wanda, and it could be related to whether Wanda will face defaults similar to some other troubled real estate companies.
Hence, the success of Zhuhai Wanda's listing is a crucial battle that will determine the future destiny of Wanda's controlling shareholder, Wang Jianlin. At this sensitive moment, the freezing of equity due to debt disputes could potentially be the final straw to impact the listing of Zhuhai Wanda. What is even more shocking to the market is the controversy surrounding the "excessive freezing" of assets. It is reported that the frozen equity of Zhuhai Wanda is a result of an economic dispute between Wanda and a company in Guangdong. The dispute involves an amount of several tens of millions of yuan, but the court in Guangdong has frozen 50.72 billion shares of Zhuhai Wanda Commercial Management Group, accounting for approximately 78% of the total shares. Based on the previous IPO valuation, the entry price for pre-IPO investors of Zhuhai Wanda was RMB 24.84 per share, and the frozen 5 billion shares of Zhuhai Wanda Commercial Management Group are valued at approximately RMB 124.2 billion. Such a judicial freeze, exceeding the disputed amount by hundreds of times, is clearly unfavorable to the party being frozen. It is difficult for any normal business to bear, let alone a large private enterprise that is already in the spotlight. According to the latest information, on July 11, the National Enterprise Credit Information Publicity System showed that the "frozen 5 billion shares of Zhuhai Wanda" were released after being frozen for 24 hours. The fact that the frozen shares worth over RMB 120 billion were all released within a day indicates that the legal issues related to the "excessive freezing" are indeed considered inappropriate by the judicial authorities. This operation not only brings unnecessary disturbances to the company but also shocks the entire market. It is unlikely that the short-term market impact of this incident will be easily eliminated.
Prior to this, in early June this year, Wanda Group experienced a share freeze. The company affected was Dalian Wanda Commercial Management Group, and approximately 1.98 billion shares were frozen. This dispute, involving a debt of RMB 1 billion between Wanda and Vanke, resulted in the freeze of equity assets valued at nearly RMB 100 billion. The court later recognized the issue of excessive freezing of assets and lifted the freeze on some of the shares. The frequent freezing of Wanda's shares is actually a common occurrence for many companies facing debt crises. However, the impact of such judicial intervention is significant. Not only does it disrupt companies like Wanda's subsidiaries that are in a critical stage of going public, but it also increases the likelihood of the collapse of companies with serious debt problems that have their equity assets frozen. Therefore, taking into account the serious consequences it may have on the involved companies. In fact, faced with well-known companies like Wanda, judicial institutions should not find it difficult to roughly assess the value of their equity assets and, therefore, adopt a more cautious approach. The occurrence of such relatively "reckless" actions reflects the lack of economic expertise in some basic courts, as well as a lack of awareness regarding the consequences of intervening in market activities, ultimately resulting in negative effects on the normal economic activities of companies.
Liu Jipeng, the dean of the Department of Capital Finance at China University of Political Science and Law, recently stated that it is normal for economic disputes to involve judicial freezes as a legal means. However, if applied improperly, it can lead to negative effects. The impact of excessive freezing on companies is significant. In the view of researchers at ANBOUND, in multiple places in China, there have been significant efforts to enhance the confidence of enterprises in development and investment and have taken measures to improve the business environment. When it comes to legal disputes involving private enterprises, there have been measures to minimize the impact on their normal operations. However, looking at Wanda's frequent experiences of excessive freezes, it is evident that some judicial institutions still lack conceptual understanding and knowledge of the market economy. Judicial institutions responsible for maintaining economic order and handling economic disputes need to have a sufficient understanding of market rules and operating principles. They should enhance their professional capabilities in finance and the economy to effectively grasp the balance of "fairness and justice" in practice. Only by doing so can they truly uphold market order and safeguard the legitimate interests of market entities.
Final analysis conclusion:
Wanda's subsidiary, Zhuhai Wanda Commercial Management, is currently facing a critical period regarding its potential listing, which is a crucial moment in determining its future. During this time, Wanda's equity assets have been "excessively frozen", which could deliver a significant blow to the company which is already facing considerable difficulties, and impact the ultimate fate of the company. Judicial institutions need to recognize the serious consequences of the actions on businesses, enhance their understanding of market rules and principles, handle economic disputes in a more rational and cautious manner, and safeguard the legitimate interests of market entities.
