The long-running saga of Huayi Brothers has a new lead actor after three decades of twists and turns. On the evening of September 16, Huayi Brothers Media Corporation (300027.SZ, trading as "ST Huayi") announced that CMC Culture has been confirmed as the industry investor for its pre-restructuring plan, with a formal agreement now signed. If the restructuring goes through, CMC will pay roughly 836 million yuan to acquire about 17% of the company and become its controlling shareholder, marking a major shift in ownership.

This move sees media veteran Li Ruigang replacing the founding Wang brothers at the helm of what was once a film industry giant. The deal price raises eyebrows and questions about what exactly 836 million yuan buys today, especially when the company's market value once swung by more than that in a single day. Back in 2015, Huayi Brothers boasted a total market cap exceeding 80 billion yuan, holding the title of A-share film industry leader with hits like "Assembly," "If You Are the One," and "The Eight Hundred."

A decade later, the company's market value has shrunk by over 90%, with first-half 2026 revenue falling below 100 million yuan. Net assets have turned negative, and cumulative losses over eight consecutive years have surpassed 8.5 billion yuan. The founders' shares are fully frozen and have been auctioned off piece by piece. The question now hangs in the balance: has Li Ruigang secured a rebirth opportunity or inherited a crushing debt burden? As of September 18, ST Huayi closed at 1.74 yuan per share, down 2.79%, giving it a total market value of approximately 4.828 billion yuan.

Where the restructuring stands

The proposal follows a standard bankruptcy restructuring pattern involving capital reserve conversion and investor transfer, but the pricing stands out as notably aggressive. Under the plan, Huayi Brothers will convert capital reserves into new shares at a ratio of 9 additional shares for every 10 held, based on the current base of 2.775 billion shares. This adds roughly 2.497 billion new shares, expanding the total to 5.272 billion shares. None of these new shares will go to existing shareholders; instead, they are earmarked for restructuring purposes: CMC Culture will receive about 896 million shares for roughly 17% of the post-restructuring total, financial investors will take about 1.128 billion shares for approximately 21.4%, and the remainder will help settle debts.

CMC's purchase price is set at 0.9333 yuan per share, totaling about 836 million yuan. Public calculations show this represents a 50% discount to the average trading price of 1.8666 yuan per share over the 20 sessions before the agreement. In exchange, CMC agrees not to transfer its shares for 36 months, while financial investors face a 12-month lock-up. The investor has already paid a 50 million yuan deposit, with the remaining investment to be paid in four installments, aiming to complete the restructuring plan by December 31, 2026. Funds will first cover bankruptcy expenses, common debts, and cash creditor settlements, with any remainder retained for working capital and industrial upgrades.

The governance overhaul is equally sweeping. Post-restructuring, the board will consist of nine directors, with CMC Culture entitled to nominate four non-independent directors and three independent directors, giving it a voting majority. One notable detail in the plan: the core subsidiary Huayi Film will use the parent company's debt-settlement resources to clear its own liabilities, thereby keeping its equity structure intact. After restructuring, the listed company will still hold 100% of Huayi Film. This appears designed to protect the crown jewel of the film business, preserving its independence and leaving room for future industrial integration.

If completed, this deal would make ST Huayi the third listed company under Li Ruigang's control, following Infinity Group (00511.HK) and SHAW BROTHERS (00953.HK) in Hong Kong. Legal experts note the entry of CMC as an industry investor significantly boosts the likelihood of a successful restructuring. While the share price of 0.9333 yuan complies with regulatory rules, original shareholders will face dilution, and the secondary market may experience short-term pressure from the expanded share base. The plan's final fate depends on court approval and creditor votes.

Anatomy of a spectacular decline

The story began with promise in 1994 when Wang Zhongjun and his brother Wang Zhonglei founded Huayi Brothers, starting in advertising before entering film production in 1998 through partnerships with directors like Feng Xiaogang. In October 2009, the company listed on the ChiNext board as the first film company to go public on A-shares, with an IPO price of 28.58 yuan that surged 147% on its debut day to 70.81 yuan. At its peak, the company's market value exceeded 80 billion yuan, and its 2015 net profit reached a record 1.218 billion yuan, with nearly 3.6 billion yuan raised that year from backers including Alibaba and Tencent.

The turning point arrived in 2018 with a massive loss, and the company hasn't looked back since. From 2018 through 2025, Huayi Brothers recorded net losses of approximately 1.169 billion, 3.978 billion, 1.048 billion, 246 million, 981 million, 539 million, 285 million, and 334 million yuan respectively, for cumulative losses exceeding 8.5 billion yuan. The stock was designated as ST in April 2026 due to other risk warnings. The root cause lies in aggressive leveraged expansion. In 2015, the company spent 756 million yuan to acquire a 70% stake in Dongyang Haohan, a company that existed for just one day, and another 1.05 billion yuan for a 70% stake in Feng Xiaogang's Dongyang Meila, whose net book value was even negative. Together, the deals created a goodwill bubble of 3.57 billion yuan that burst in 2018, triggering a 973 million yuan impairment and the first annual loss.

The heavier burden proved to be resort entertainment. Huayi Brothers attempted to replicate the Disney model, investing a total of 3.5 billion yuan in the Suzhou Huayi Brothers Movie World, equivalent to over 1.4 times the company's total assets at the end of 2011. But the IP portfolio lacked the drawing power to sustain visitor numbers, and by 2025, the brand licensing and resort entertainment segment had collapsed to just 169,800 yuan in revenue, down over 91% from its peak. The company's ability to produce hits also eroded. Its last blockbuster as a lead investor was "The Eight Hundred" in 2020, and from 2020 to 2024, revenue from the film and entertainment segment shrank over 65%, from 1.309 billion to 443 million yuan. Total 2025 revenue was just 310 million yuan, down 33.43% year-over-year.

Debt and litigation crises soon followed. By the end of 2025, total assets stood at 2.196 billion yuan against liabilities of 2.114 billion yuan, leaving net assets of just 82.0777 million yuan and a debt-to-asset ratio of 96.26%. By the 2026 interim report, net assets attributable to shareholders had turned negative at -5.5856 million yuan, with the debt ratio hitting 100.28%, formally insolvent. In December 2025, overdue debts to banks and financial institutions totaled 52.5 million yuan, 38 bank accounts were frozen across the company and its subsidiaries, and litigation and arbitration cases over the prior twelve months involved amounts of about 111 million yuan. The Wang brothers fell from grace, repeatedly restricted from high consumption and with their shares 100% frozen. By the first half of 2026, they held 5.88% and 1.98% respectively, a combined 7.86%; after July's judicial auctions, their combined stake dropped to 5.41%.

Perhaps more telling is the withdrawal of major capital backers. Alibaba's affiliates, once close partners, reduced their combined stake from 6.06% to just below the 5% regulatory threshold in December 2025 through block trades. By the first quarter of 2026, Tencent had exited the top ten shareholders entirely. A film company simultaneously abandoned by both internet giants speaks volumes about its prospects.

Li Ruigang's strategic calculus

On the surface, taking control of a company that has lost money for eight straight years with negative equity might seem like a bad bargain. But understanding Li requires looking at his recent capital maneuvers. Li graduated from Fudan's journalism school in 1994 and joined Shanghai Television, becoming president of SMG at just 33 in 2002. After the 2004 film "A World Without Thieves" featured a character named "Uncle Li" with the famous line about being angry with serious consequences, SMG insiders adopted the nickname for him, and it has stuck throughout media and investment circles ever since. In 2010, he founded CMC Capital Partners, China's first cultural industry PE firm, with investments spanning Bilibili and iQiyi. In 2015, he established CMC Culture, a comprehensive media and entertainment group with registered capital exceeding 6.387 billion yuan, earning him the title "China's Murdoch."

The group's portfolio reads like half of Chinese entertainment history: TVB, SHAW BROTHERS, Daylight Entertainment, Caixin Media, CMC Pictures, Oriental DreamWorks, UME Cinemas, and Zilong Games. Daylight Entertainment alone produced acclaimed series including "Nirvana in Fire," "Ode to Joy," "Parents Love," "Like a Flowing River," "Minning Town," and "The Story of Ming Lan." The year 2026 marks a critical chapter in Li's capital strategy. In January, CMC injected its core film assets into Hong Kong-listed SHAW BROTHERS in a deal valued at approximately 4.577 billion yuan, a move dubbed "snake swallowing elephant" given the target's market cap was under HK$600 million at the time. The transaction lifted CMC's stake in SHAW BROTHERS to 59.74%, achieving full control and effectively providing a backdoor listing for content assets in Hong Kong.

Now, roughly eight months later, Li is turning his attention to the A-share market. Industry observers see the Huayi Brothers deal through a dual lens of industrial synergy and platform acquisition. CMC's assets spanning series production, film distribution, and cinema exhibition cover the full chain, while Huayi's core value lies in its accumulated IP library and film production capability. Bringing Huayi into the fold fills a gap in film production, complementing Daylight Entertainment's strength in television series for a "series plus film" content matrix. From a capital perspective, an A-share listing platform itself is a scarce resource. The 2026 injection into SHAW BROTHERS was constrained by the Hong Kong film sector's lower valuations and liquidity compared to A-shares. Acquiring Huayi means securing a clean restructuring shell with access to mainland capital markets. In effect, the Hong Kong platform would handle TV and film investment and production, while the A-share platform could become CMC's vehicle for distribution, IP operations, and offline entertainment. A cross-market entertainment empire spanning content to channels is gradually taking shape.

Yet the "white knight" story is no fairy tale. The SHAW BROTHERS acquisition of CMC's core assets remains incomplete, still in due diligence as of late August. Running both operations simultaneously tests both funding capacity and integration capabilities. CMC itself faces headwinds, with revenue declining for three consecutive years: 4.571 billion yuan in 2023, 4.022 billion yuan in 2024, and 3.178 billion yuan in 2025, while net profits were 287 million, 363 million, and 297 million yuan respectively. Whether an investor with shrinking revenue can inject genuine growth into a listed company with sub-100 million yuan half-year revenue remains an open question. Restructuring is merely the starting point; the true test lies in whether Huayi can consistently produce quality projects and achieve sustainable profitability after debt resolution.

For Li, this represents both a capital maneuver to secure an A-share platform at a modest price and a key move in building a cross-market entertainment empire. A company that once defined China's film industrialization now depends on the favor of another media titan for survival, a fittingly ironic conclusion to three decades of rise and fall. Whether Li can turn the company around is the question on every observer's mind as the story continues to unfold.