Best New Material's HK IPO Raises Questions Over Concealed Related-Party Deals and Pre-Listing Share Transfers.

Just ahead of its Hong Kong IPO, Best New Material saw discounted share transfers despite a surge in earnings. Surprisingly, the largest transferee, Hechuang Mingzhu, appears to be linked to Wu Chunyuan, a founder of AAC Tech, upon deeper investigation. Notably, AAC's subsidiary Changzhou Optoelectronics directly holds nearly 3% of Best New Material and has consistently contributed a significant portion of its revenue. This raises questions about the relationship between Hechuang Mingzhu and the AAC system, whether the company has concealed related-party ties given combined holdings exceeding 10%, and whether the low-price share transfers signal potential benefit transfer risks.

Zhenjiang Best New Material Co., Ltd. has recently re-filed for a listing on the Hong Kong Main Board, with Guotai Junan as the sole sponsor. The IPO proceeds are earmarked for building an R&D center, potential future acquisitions, expanding sales and service networks, and working capital and general corporate purposes.

Public records show that Best New Material was founded in March 2017 and is headquartered in Zhenjiang, Jiangsu. The company is a national-level specialized and innovative enterprise focused on electronic functional enhancement materials, with core products designed to improve the acoustic, optical, thermal, and electrical performance of components and devices in consumer electronics and new energy sectors. Currently, Zhengxingu Capital, through its investment platform Shanghai Zhengxindexu Technology Co., Ltd., holds 37.72% of the company as the controlling shareholder. Zhengxindexu is wholly owned by Shanghai Lejin, whose general partner is Shanghai Zhengxingu, which is 99.90% held by Lin Lijun, founder of Zhengxingu Capital. Guo Mingbo, the technical core and manager, holds 7.5% of the company, ranking as the third-largest shareholder.

According to the prospectus, Best New Material previously sought a listing on the Shenzhen Stock Exchange. In October 2021, the company engaged Guotai Junan Securities as a tutoring institution to provide guidance and preliminary compliance advice per CSRC requirements. In June 2022, it received a completion confirmation for the tutoring work from the Jiangsu CSRC bureau, valid until June 2023. However, between the second half of 2022 and the first half of 2023, after considering market conditions, strategic factors, uncertainties in the A-share listing timeline, and new listing standards on the ChiNext board implemented at the end of 2022, the company re-evaluated its A-share listing plans and ultimately decided not to pursue the Shenzhen listing. No formal application was ever submitted for that attempt.

Notably, ahead of its A-share push, the company's valuation had reached 1.836 billion yuan. In July 2021, Jiuzhou Shunchuang, controlled by Sunny Optical, invested 36 million yuan for a 677,600 yuan capital increase, valuing the company at 1.836 billion yuan post-investment. On January 12, 2026, Best New Material filed its first Hong Kong IPO application. However, just before the filing, the controlling shareholder transferred shares at a discount. Between November and December 2025, Zhengxindexu transferred a total of 7,262,815 shares with a par value of 1.00 yuan each to six transferees listed in the table, for a total consideration of 283 million yuan. The main transferee was Gongqingcheng Hechuang Mingzhu Venture Capital Partnership (Limited Partnership), which paid 124 million yuan. This transfer valued the company at 1.477 billion yuan, nearly 20% lower than the 1.836 billion yuan valuation in July 2021. Given that Best New Material's revenue surged in 2025, it is puzzling why the share transfer valuation did not increase. From 2023 to 2025 and the first six months of 2026, the company's revenue was 320 million yuan, 355 million yuan, 625 million yuan, and 365 million yuan, with net profits of 96 million yuan, 113 million yuan, 155 million yuan, and 70 million yuan, respectively.

In the same old-share transfer, management member Guo Mingbo was also on the list. Best New Material is primarily managed by Li Chengbin and Guo Mingbo, with Li serving as Chairman and Executive Director and Guo as Executive Director and CEO. Guo joined the company in June 2019 as a director and CEO. The company stated that Guo's acquisition of old shares was mainly to clarify the relevant equity structure. In December 2023, Guo was granted restricted share awards under the 2023 Restricted Share Incentive Plan, subscribing to new capital increases in Zhengxindexu for a total of 32 million yuan, acquiring approximately 6.63% of Zhengxindexu (equivalent to about 4.00% of the company's total issued shares). To enable Guo to directly hold company shares, the 2023 plan was amended in November 2025, allowing Guo to reduce his stake in Zhengxindexu by transferring all his shares in it, while Zhengxindexu transferred 1,382,368 shares of the company to him.

Unexpectedly, less than two months after the discounted transfer, the company further issued shares at even lower prices to management and an equity incentive platform. The prospectus shows that on December 24, 2025, the company signed a capital increase agreement with Chairman Li Chengbin and Shanghai Demao, under which Li subscribed for 1,259,971 shares and Shanghai Demao for 179,996 shares, at costs of 31.5 million yuan and 4.5 million yuan, respectively, representing 3.5% and 0.5% of the expanded share capital. Li's investment of 31.5 million yuan for 3.5% implies a post-investment valuation of approximately 900 million yuan, a 50% discount from the 1.8 billion yuan earlier valuation, while the November 2025 old-share transfer was based on a 1.477 billion yuan valuation. The significant discrepancy between two transactions within two months raises questions: why did the valuation drop despite surging earnings, and who ultimately benefits? Is there a risk of benefit transfer? Additionally, Li is a core figure in the controlling shareholder camp, and Shanghai Demao serves as an incentive platform for directors, supervisors, and key employees. Is this arrangement of issuing shares to insiders at low prices fair? Why such a stark pricing difference between the two transactions?

While management share increases and employee stock plans are common governance arrangements for pre-IPO companies, aiding team stability and talent attraction, the fairness of the pricing warrants scrutiny. In the discounted transfer, the largest recipient was Hechuang Mingzhu, paying 124 million yuan, accounting for over 40% of the total transaction value. Hechuang Mingzhu is now the company's second-largest shareholder with a direct stake of 8%. According to the prospectus, Hechuang Mingzhu is a limited partnership focused on industrial investment. Its general partner is Shenzhen Hechuang Yucheng Asset Management Co., Ltd., which holds about 0.08% of the partnership and is ultimately controlled by Li Bingshan. Hechuang Mingzhu has 17 limited partners, with Nanning Ruizhi Venture Capital Co., Ltd., a company ultimately controlled by Ye Huamei, holding about 47.58% of the partnership interests. No other limited partner holds 10% or more.

Further investigation shows that Nanning Ruizhi's ultimate shareholder is Shenzhen Yuanyu Industrial Development Co., Ltd., a company formerly known as Shenzhen Yuanyu Electronic Co., Ltd., established in 1993 and registered at the AAC Industrial Park in Longgang District, Shenzhen. Its legal representative is listed as INGRID WU CHUNYUAN, a name that matches the English name of Wu Chunyuan, co-founder of AAC Tech. AAC's 2024 annual report lists Wu Chunyuan's name as "Wu Ingrid Chun Yuan." Wu is one of the founders of AAC Tech, established in 1993, and serves as a non-executive director without involvement in daily operations. She graduated from Changzhou Health School in 1989, is the spouse of Pan Zhengmin, AAC's executive director and CEO, and the mother of Pan Kaitai, executive vice president and chief innovation officer. She is also a director of Sapphire Hill Holdings Limited and K&G International Limited, both major shareholders of AAC Tech. On the 2025 New Fortune 500 Rich List, Pan Zhengmin and Wu Chunyuan ranked 186th with a combined fortune of 17.29 billion yuan.

Best New Material has business dealings with AAC Tech. In October 2023, at a strategic cooperation signing ceremony, Best New Material's chairman Li Chengbin welcomed the AAC Tech team, noting that AAC Tech is a global leader in acoustic and optical technology and component supply. He emphasized that Best New Material, as AAC's strategic supplier over five years, had leveraged combined material and application technologies to accelerate the adoption of new materials in end products, enhancing user experiences. In fact, Best New Material relies heavily on major customers, with its largest client having an equity stake in the company. For the years ended December 31, 2023, 2024, and 2025, and the six months ended June 30, 2026, sales to its top five customers were 282.6 million yuan, 292.1 million yuan, 489.6 million yuan, and 276.2 million yuan, representing 88.2%, 82.3%, 78.4%, and 75.7% of total revenue, respectively. Customer A, which also holds a 2.83% stake, contributed 28.4%, 20.9%, and 20.7% of revenue in the respective periods. Based on the prospectus, Customer A is likely Changzhou Optoelectronics, which focuses on R&D and manufacturing of digital cameras, key components, and new electronic components, and is an indirect wholly-owned subsidiary of AAC Tech.

This raises further questions: What is the relationship between Hechuang Mingzhu and AAC Tech? Is the company concealing related-party relationships? Combined holdings of Hechuang Mingzhu and Changzhou Optoelectronics exceed 10%. Under Hong Kong listing rules, shareholders with 10% or more are defined as "substantial shareholders/connected persons," while natural persons holding 5% or more but less than 10% are considered related parties under A-share rules but not connected persons under Hong Kong rules unless significant influence is proven. The company's related-party transactions primarily involve management compensation, with no other related-party deals disclosed. Does the pre-IPO discounted transfer pose a risk of benefit transfer? In its prospectus, Best New Material stated that during the track record period, it engaged in certain related-party transactions mainly related to director and key management compensation, and that these transactions were conducted in the ordinary and normal course of business on a fair basis.