Hikvision CEO And Vice-Chair Under PRC Government Investigation

By John Honovich and Charles Rollet, Published Nov 14, 2019, 09:00am EST (Info+)

In a surprising and globally covered move, Hikvision CEO Hu Yangzhong and Vice-Chairman Gong Hongjia are being investigated by China's securities regulator for "suspected information disclosure violations", Hikvision disclosed in a brief letter to investors.

This move was quickly reported around the world, with few details, ranging from:

Indeed, even PRC state-media Global Times covered it:

No one has publicly made clear how serious this 'suspicion of illegal information disclosure' is.

However, one thing not being reported by global media is the importance of Hu Yangzhong or "Mr. Hu" as he is reverentially referred to by Hikvision employees who have spoken to us over the years.

The move is surprising given that state-controlled Hikvision has extensive PRC government connections and is currently a high-profile target of US government human rights sanctions.

While Hikvision (the company) is distancing itself, Hu Yangzhong has long played a central role leading the firm, meaning this could have a significant impact regardless. In this note, we examine this investigation, including:

  • Few Official Details/Undisclosed Bonus Allegations
  • Hikvision Response: Individuals, Not Company, Under Investigation
  • Impact is Clear
  • Terrible Timing for Hikvision
  • Political Factors at Play?
  • Legal Consequences
  • Investigation Widely Reported in West and PRC
  • Hikvision Stock Impact
  • Unwelcome Development in Home Market

Few ******** *******, ******** ******* ** *********** *******

*********'* **************** *** ************* ******** ** ******* details ***** *** *************'* ******, ****** the **** **** **'* ******* ** violations ** ********* ********** ************.

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**. **** **** **** ******* *** company's *********** ** ******, ** **** some ********** ** *** *********, *** did *** ******** ** ** *** stock ********.

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UPDATE: ****'* ****** ********* **** ****** ** *************

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*** ************* ** **** **** ** directed **Mr. **** *******'* ******** *************, which will not affect his normal performance in the company, and the company's production and operation activities will not be affected. The ******** ************ *** ******* ** *** ****** ********* **** ******** *** *********** ** *** ******* *** *** **** ********** ***** ** *********, and has nothing to do with the company and other directors, supervisors and senior managers of the company. Mr. Gong Hongjia will actively cooperate with the investigation work of the China Securities Regulatory Commission and fulfill the information disclosure obligations in strict accordance with the regulatory requirements. Special announcement. [emphasis added]

********** ***** ** ********** ** ************* source ** ** ** ************* ***** ********** *****'* ******** *********, *** ***** Securities ********** **********.

Bonuses **********

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Hikvision ********: ***********, *** *******, *** ***** *************

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Hu ****** ** *****

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********, **. **, ********* ** ***** Hikvision's *********, ** *** ********** ****** of *********'* ************* ******** ****** ***, indeed, ********* ********* **** ********* ********* respect *** **** ***** *** *****.

Gong **** *********

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Major ************

**** *** *** ***** ********* ************. Hu ********* ******** **** *.**% ** Hikvision, ***** ** ********* ***** ***** $870 *******, ********* ** *********'*** **** ******. **** ******* ******** **** **.**% of *********, ********* ***** ***** $* billion. ***** **** ** *** ****** than **, ** ** *** **** vital ** *********'* **********.

Poor ****** *** *********

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Strange ***** *********'* *** *** ***********, ********* ******* ********

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*** ********** ***** ** **** ********* has ****** ********* ***** ************* **** ***** ***** **** * public **** ** **** ** *****.

Chairman **** - ***** ** **?

***** ***** *** ***** ******* *** implicated ** *** *************, *******, *********** ** *** *****, **** ********, *** **** ** **. **, the *******'* ********* ***** ********* *** NPC ********, ** ***.

**** ** ******** *** ********* ** that ** ** **** **** **** but ** ** ******* ** ** how **** ******* ** **** ********* 'illegal *********** **********'. *** **** *** know ***** **? ***** **** *** help ** ** ******** **** **** public *************?

Potential ***** ************

********* ** ************* *** ** *** ***, *** ********** ********* *** ****** administrative ********* (**** ** *****), *** if *** ********** ****** ** ******** acts, "** ***** ******** *** ****" to * ******** ******** *****.

Stock ******

*********'* ***** **** ****** *% ** the **** *** **** ****** **** part ** *** ****, ****** *** trading *** **** *.*%:

Outlook *******

****** *** **** ********* ***** *** exact ****** ** **** ************* ** the ******** ***** ****** ** ********* to *******.

*** ****-**** ******** *** ********* ** that **** ** * ***** **** nuisance *** **. **, ** ***** action ** ***** ******* **. **, and *** **** **** ** ***** in *** *************. ** **, ****** will **** ****** ***** ****.

*******, ** *** ************* ********** *** ability ** **. ** ** ******* Hikvision, ** ***** ******** *** ********** of * ******* ******* ***** *********** overseas ******.

Vote / ****

Comments (5)

This is probably just a move to safe face. These guys will be used as fall guys, take the blame. Hikvision will declare they removed the bad seeds. Yadda, yadda, yadda.

Agree: 2
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These guys will be used as fall guys

It's possible but I don't get it. Mr. Hu, by all accounts, seems to be a strong positive for Hikvision. How can Hikvision be better off with a weakened or removed Mr. Hu? Serious question, anyone with input?

Agree: 1
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I agree. I think the fact they publicized this at all means those two are screwed. Probably end up taking all their money "for the people" and sending them away.

Agree: 1
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Funny

Lemme guess... They accidentally disclosed to the West that they were building analytics to identify Uyghurs?

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Funny: 7

Update: While there are no new official announcements about this investigation, it continues to be discussed/speculated about in PRC media.

The National Business Daily, a business newspaper, published an opinion article pointing out that Gong Hongjia and Hu Yangzhong have had multiple stock transactions between each other in the past, with Gong liquidating positions and Hu increasing his. The NBD speculated this could have led to Hu obtaining stock under the table, potentially at lower-than-market prices.

The implication here is that due to PRC stock market restrictions (particularly for state-backed firms like Hikvision,) senior Hikvision managers were unable to get their full stock options, so Gong did it out of his own pocket without properly declaring this.

Xinhua raised similar concerns an opinion piece, saying that even if Gong gave away stock in good faith, the question is whether it was done in a fully compliant way:

Is it wrong for the boss to pay the employee a red envelope [gift]? In fact, it is possible to do bad things with good intentions if you do not follow the rules.

Finally, a business news outlet called Wumian Caijing published an article calling out alleged discrepancies between Hu Yanghzong's reported salary in 2017-2018 and his large stock purchases around that the time.

The fact that this case is being discussed/speculated about in PRC media is notable - this is a country with some of the world's strictest censorship. While there is no public proof of this happening, it could be evidence of dissatisfaction with certain Hikvision people from the PRC government's higher echelons.

Agree: 1
Disagree
Informative: 1
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