Richful Lube Additive Co. disclosed this week that it received a warning from securities officials who concluded that some funds raised from a 2020 public stock offering were not used as the company had said on a factory that is under construction.
According to a Dec. 25 Richful filing on the Shenzhen Stock Exchange, the letter from the Henan Supervision Bureau of the Chinese Securities Regulatory Commission did not specify the amount of funds in question. Richful’s filing said the bureau filed a record of its finding, but it did not mention any penalty.
Richful, which operates in China as Ruifeng New Materials Co., said it will make adjustments to its oversight and administration of such projects to prevent a recurrence of such incidents.
The company is headquartered in Henan, in the city of Xinxiang. It currently operates a factory there with capacity to make 100,000 metric tons per year of lubricant additive components and 15,000 t/y of additive packages.
In 2020 it conducted a stock offering that raised ¥1.13 billion (U.S. $173 million) and said it would use proceeds to build a second factory in Cangzhou, Heibei province. A first phase of the project was to create capacity to make 60,000 t/y of components and 12,800 t/y of additive packages.
As quoted by Richful, the supervision bureau’s letter said that while some of the proceeds were spent directly on the project, that an unspecified amount was used to replace funds that had already been spent. A translation of the quoted letter said, “part of the raised funds was not used strictly in accordance with the purpose disclosed in the prospectus, and the replacement of raised funds was not disclosed accurately.”
Richful could not be reached for comment.