Xilinmen's "home" suddenly changes, founder sued for illegal misappropriation of funds

Ask AI · Why Did the Family Governance of Xilinmen Go Out of Control and Trigger a Fundraising Storm?

Produced by | Damo Finance

The leading mattress industry company Xilinmen (603008.SH) has recently fallen into a “family dispute” storm.

On April 3, Xilinmen (603008.SH), the “Number One Mattress Stock” on the A-share market, hit the daily limit down for the second consecutive day, closing at 12.31 yuan per share, with a market value of 4.534 billion yuan.

This limit-down move began with a “negligent insider” case announcement.

On March 27, Xilinmen suddenly issued an announcement saying that funds in the bank accounts of its controlling subsidiary Xitu Technology had been illegally misappropriated by insiders, with a cumulative amount as high as 100 million yuan. The company reported the case to the public security authorities on March 26 and implemented protective judicial freezing on the relevant accounts, involving a total amount of over 900 million yuan. The two combined amounts are over 1 billion yuan, accounting for 42.69% of its cash and cash equivalents as of 2024.

It is worth noting that Xilinmen’s stock price has been showing a clearly downward trend since March 20 this year, and so far it has lost 42% of its market value over 11 trading days.

After Xilinmen released the announcement, the Shanghai Stock Exchange issued a regulatory work letter that same night, requiring the company to conduct a comprehensive self-examination. And this self-examination completely brought Xilinmen’s internal risks to light.

On the evening of April 1, Xilinmen released multiple major announcements in succession. Among them, two stated that the China Securities Regulatory Commission (CSRC) had filed a case for investigation into Xilinmen and its actual controller Chen Ayu; one announced that the shares of the controlling shareholder and its concerted parties had been judicially frozen; and there was also one that was Xilinmen’s “complaint/pleading.”

The announcement shows that Xilinmen and its two subsidiaries (Shunxi Company and Yingxi Company) jointly filed a lawsuit for disputes over liability for damage to the company’s interests, suing its controlling shareholder Zhejiang Huayi Intelligent Manufacturing Co., Ltd. (hereinafter “Huayi Intelligent Manufacturing”), its concerted party Shaoxing Yuecheng Huahan Equity Investment Partnership (Limited Partnership) (hereinafter “Huahan Investment”), and the actual controller Chen Ayu, and seeking compensation of 478 million yuan from the defendants.

What is even more noteworthy is that in the above announcements, Xilinmen disclosed that the three defendants were non-operationally occupying listed company funds with a balance of nearly 190 million yuan, and that the amount had already exceeded the absolute value of 5% of the company’s latest audited net assets, creating a risk that the company’s stock could be subject to other risk warnings (the stock abbreviation is prefixed with “ST”).

On April 2, Xilinmen issued another announcement stating that, as of now, all 8.107 million shares of Chen Ayu personally have been fully judicially frozen. Huayi Intelligent Manufacturing and Huahan Investment have frozen 20.8429 million shares and 8.4 million shares, respectively, accounting for 24.58% and 22.82% of the shares held.

A misappropriation incident involving 100 million yuan was thus uncovered, revealing the secret that Xilinmen’s three defendant-shareholders had illegally occupied huge amounts of funds, eroding the interests of the company and other shareholders.

The Founder Turns “Family Thief”

The key figure at the center of this crisis is Xilinmen’s founder and chairman Chen Ayu.

In 1984, Chen Ayu started Xilinmen from scratch; in 2012, he led Xilinmen to successfully list on the Shanghai Stock Exchange, becoming China’s first A-share listed mattress company, known as the “Number One Mattress Stock in China.” Since 2021, Chen Ayu’s children have entered Xilinmen’s board, forming a family governance structure in which Chen Ayu serves as chairman, his son Chen Yicheng serves as vice chairman, and his daughter Chen Pingqi serves as a non-independent director.

However, in this crisis, Chen Ayu’s role has shifted from founder to defendant. It is exceptionally rare in capital markets for a company he created himself to sue him and end up in court.

The lawsuit announcement shows that this incident mainly involves three “core parties,” namely the controlling shareholder Huayi Intelligent Manufacturing, Huahan Investment, one of the controlling shareholder’s concerted parties, and the actual controller Chen Ayu, holding 84.7997 million shares, 36.8079 million shares, and 8.107 million shares of Xilinmen respectively—accounting for 23.03%, 9.99%, and 2.20% of the shares. In addition, Chen Ayu and his children also hold 4.1956 million shares of the company through the “Shaanxi Guotou · Jin Yu No. 201 Securities Investment Collective Funds Trust Plan,” accounting for about 1.14%.

As the case progresses, the relationships among the three major core defendants have come into view. They do not exist in isolation; instead, they are tightly bound through equity and family relationships.

Huayi Intelligent Manufacturing is jointly held by Chen Ayu and his children Chen Yicheng and Chen Pingqi, as well as a wholly owned company of the Pingxiang Municipal State-owned Assets Administration Commission. Among them, the three members of Chen Ayu’s family together hold as much as 74.57%, and Chen Ayu is the actual controller.

Huahan Investment is Chen Ayu’s family’s private equity investment platform. According to Qichacha, Huayi Intelligent Manufacturing holds 40% of its equity.

Opaque Operations

According to the information disclosed in the complaint, Chen Ayu and the defendant companies misappropriated the funds of the listed company through two methods.

The first is a loan-to-loan-transfer model. In 2026, Xilinmen and its subsidiaries applied to banks for loans for business needs, but the defendants intercepted the credit funds through a “loan-to-loan transfer” business model. Xilinmen involved 15 million yuan, and its subsidiary Yingxi Company involved 57 million yuan; a total of 72 million yuan was transferred to the defendant side, and it has not been returned to date.

The second is a factoring financing model, which is also the core method of the current funds occupation. Between 2025 and 2026, the Xilinmen side carried out factoring financing business in order to relieve suppliers’ funding pressure. Using this model, the defendants applied to banks for financing in the name of the suppliers; the funds ultimately flowed to related parties including Huahan Investment and Huayi Intelligent Manufacturing, as well as their designated accounts, for a total of about 406 million yuan.

That is to say, in this transaction, the money was borrowed by Chen Ayu, while the repayment obligation still remained with the listed company.

As of the date of the announcement, due to the maturity of some accounts payable, Xilinmen has actually assumed payment obligations to the bank totaling 63.5512 million yuan, and its wholly owned subsidiary Shunxi Company has also actually assumed payment obligations to the bank totaling 54.0135 million yuan, for a combined prepayment of nearly 118 million yuan.

Together, these two operations led to the controlling shareholder’s non-operational occupation of the listed company’s funds with a balance of 190 million yuan. Apart from the large amount, they also planted ST risk for Xilinmen.

In addition, in the announcements, Xilinmen stated that if, as a result of this incident, the company’s auditing institution finds that the effectiveness of internal control over the company’s financial report as of December 31, 2025, and the company’s 2025 annual audit report are issued with non-unqualified opinions (non-unqualified), then the company’s stock may be subject to other risk warnings or delisting risk warnings after the 2025 annual report is disclosed.