Xiao, Transsion CFO Released from Custody amid Uncertainty

Xiao CFO released from Custody: Transsion Holdings announced last week its Chief Financial Officer, Xiao Yonghui, has been freed from detention by Chinese authorities.

Details about it remain scarce, raising more concerns about internal governance and broader challenges facing the business.

Xiao CFO Released From Custody

Xiao, who has served as CFO since 2014, was detained on September 6 in Dandong, near China’s border with North Koresiona. Transsion announced on September 7 but gave only a few specifics about the reasons. 

According to Benjamindada, “The company received a “Notice of Release from Detention” issued by the Supervisory Commission of Zhen’an District, Dandong City, indicating that the detention measures imposed on Mr. Xiao Yonghui have been lifted. The company’s production, operations, and management are functioning normally, and Mr. Xiao Yonghui has resumed his duties as CFO.”

The company assured investors that “current production, operations, and management remain normal,” a position it reiterated in last week’s announcement. 

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Transsion Company News

Despite Transsion’s reassurances and Xiao CFO being released from Custody, investors were unsettled by the developments. When his detention was first announced, Transsion’s stock plunged 8% when the market opened on Sept. 9 and later closed down 5%. 

The stock recovered following Xiao’s release, but investor confidence towards the company remains fragile.

Transsion’s shares have been on a downward trajectory since mid-April. Last Friday’s closing price of 84 yuan is down more than 30% from the 120 yuan recorded in mid-April. While the stock trades on China’s domestic A-shares market, it is also accessible to international investors through a program linking the Shanghai and Hong Kong stock exchanges.

Transsion currently trades at a price-to-earnings (P/E) ratio of 18, which is below the 24 for rival Xiaomi (1810. HK), which is also expanding into markets where Transsion operates. Both figures are significantly lower than Apple’s (AAPL.US) P/E ratio of 35, reflecting investors’ willingness to award higher valuations to premium market leaders with higher profit margins.

Xiao CFO Released From Custody, Transsion Might Face Legal Issues

The lack of transparency has investors wary. Such are not uncommon in China, especially among top execs suspected of wrongdoing or involved in investigations into others. Its digital industry has been particularly affected, with notable cases like DouYu and China Renaissance yet resonating. 

Transsion appears to have avoided a larger crisis with Xiao’s return to his duties.

The CFO crisis appears to be resolved by now, though it could still point to future legal issues for Transsion. 

At the same time, the ongoing patent lawsuits remain a major issue dogging the company. Addressing those concerns will be crucial for Transsion to keep up its momentum, as rivals like Xiaomi and Oppo nip at its heels in Africa and try to slow its rise in other emerging markets.

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