Gotion Exposed: How Did a CCP-Controlled Military-Linked Dishonest Company Get US Approval? (Part 2)

Hello, everyone, welcome to Inconvenient Truths. I am your host Jennifer Zeng.

In the previous episode, we discussed the military background of Gotion High-Tech, which recently obtained approval from the US government to invest in and establish an EV battery plant in the United States. We highlighted that the Chairman of Gotion also serves as the CCP Party Secretary and the company's strongest argument for obtaining the US government's approval lies in its top shareholder, Volkswagen. This indicates that Gotion is not a 100% Chinese-owned enterprise. 

Now, let's delve into the actual situation. However, If you haven't watched the previous video, I encourage you to go back and watch it before continuing with this one.

Now let's look at an article published on the mainland website "EVHui.com" in May 2020. 

This article reveals the details of Volkswagen's acquisition of Gotion. 

The article states, "On the evening of May 28, Gotion High-Tech disclosed the proposed private placement plan, in which Gotion Zhuhai, Gotion’s  controlling shareholder and its actual controller Li Zhen, will jointly transfer 5% of their holdings in Gotion High-Tech to Volkswagen China."

This is the table from the article showing the changes in shareholding before and after Volkswagen's acquisition of Gotion High-Tech.

We can see that before the acquisition, Gotion Zhuhai, Li Zhen, and his son Li Chen collectively held 32.73% of the shares, while other shareholders held 67.27%.

After the acquisition, the shareholding and voting rights of Gotion  Zhuhai, Li Zhen, and Li Chen decreased to 18.20%. Volkswagen China's shareholding was 26.47%, but its voting rights were only 13.20%. The shareholding and voting rights of other shareholders were 55.33%.

Here's the crucial point: the article states, "Based on the information disclosed by Gotion High-Tech, although Volkswagen China will become the largest shareholder of Gotion High-Tech, the actual controller of Gotion will not change in the short term. According to the provisions of the Shareholders' Agreement, Volkswagen China has committed to irrevocably waive its voting rights in a portion of Gotion High-Tech shares for a period of 36 months from the completion of the transaction or a longer period determined by Volkswagen itself, so that Volkswagen China's voting rights ratio is at least 5% lower than that of the founding shareholder."

"According to the above arrangement, after the completion of this private placement and share transfer, Li Zhen and his concerted parties will still be the shareholders with the largest voting rights in the company, and their voting rights will be more than 5% higher than Volkswagen China, which holds the second-largest voting rights. The directors nominated by Li Zhen and his concerted parties will occupy more than half of the seats on the company's board of directors. Therefore, after the completion of this private placement and share transfer, Li Zhen will still be the actual controller of the company, and this offering will not change the company's control."

Another report published on Sina Finance has this title: "Anhui's richest man emerging from the 'cadres going into business': Gotion's Li Zhen and his capital history”.

This report also states, "According to the agreement, Volkswagen Group, which currently holds 26% of Gotion’s shares, has become the largest shareholder of Gotion High-Tech, but Volkswagen Group does not actively seek control, humbly stating, 'There is no need to intervene in their management.'"

The report further states, "Even after being named the richest man in Anhui Province by Forbes in 2016, Li Zhen has remained low-key and silent like an old-fashioned government-enterprise person. However, when it comes to the issue of control over Gotion High-Tech, this low-profile ‘humble man' demonstrates absolute authority through practical actions."

"Li Chen, born in 1990, is another key figure in the Li family. He is Li Zhen's only son and the designated successor.

“While Li Chen was still studying at Tianjin Polytechnic University, Li Zhen transferred 6% of the company's shares to this young man who had just turned 20. Later, Li Chen went to the United States to study at Purdue University."

In other words, it is evident that Li Zhen intends to build Gotion as a family business and has already been deliberately grooming his son as the successor.

The article also states, "Whether it is Li Zhen and Gotion's ‘official-to-civilian' background, or the support and protection provided by local governments at all levels to local high-tech companies in the current geopolitical economy, it is destined that foreign companies like Volkswagen can no longer easily dominate joint ventures as they did thirty years ago."

Under this double insurance, it is not easy for Volkswagen to join the management and take control in actual circumstances. Under Volkswagen's modesty, is there perhaps some helplessness from the saying, 'prosperity and decline never last'?

Here the article used a famous Chinese saying “三十年河东，三十年河西”, which can also be translated as “everything in life is cyclical", or “every dog will have its day.”

From this implicit statement, we can speculate that perhaps Volkswagen China had to agree to give up its voting rights after acquiring Gotion in order to continue its operations and business in China, allowing Li Zhen to retain actual control over the company. This may have been one of the conditions of the transaction.

So, what I would like to know is whether the materials “voluntarily” submitted by Gotion to the Committee on Foreign Investment in the United States (CFIUS) mentioned Li Zhen's role as the party committee secretary. Did it truthfully disclose that although Volkswagen is the largest shareholder of Gotion, the actual control of Gotion remains in the hands of Li Zhen? 

If not, does it constitute intentional concealment and deception?

Key Point Four: Gotion High-Tech's Stock Price Continuously Declines, Li Zhen Was Issued a Warning Letter by the China Securities Regulatory Commission

Another thing that puzzles me is that the stock price of Gotion High-Tech has been continuously declining over the past year.

 On June 14, it reached its lowest point in a year at 25.61 yuan, almost halving from its highest point of 45.17 yuan. 

In other words, even after receiving approval from the US government, the stock price continued to fall. It was only on June 15 that a sudden surge occurred.

Another piece of information that Li Zhen may not have reported to the US government is that on July 20, 2022, the Anhui Securities Regulatory Bureau of the China Securities Regulatory Commission issued a warning letter to him.

The warning letter stated that Gotion had violated regulations in terms of bad debt provision, approval of related transactions, disclosure of government subsidies, and repurchasing and canceling restricted stocks held by former employees. As a result, a warning letter was issued and the relevant information was recorded in the integrity file.

This means that Li Zhen's integrity is seriously questionable. The financial officer of Gotion, Pan Wang, was also penalized together with him.

Another article published by the Chinese media outlet “Beike Economy" on July 20, 2020, stated that "Gotion High-Tech is deeply involved in the capital occupation controversy" and "regulatory measures have been taken due to multiple violations, including non-operational fund occupation." 

The article also mentioned that on July 15, Gotion announced that it had recently received a decision from the Jiangsu Regulatory Bureau of the China Securities Regulatory Commission on "ordering corrective measures for Gotion High-Tech," indicating that Gotion had engaged in non-operational fund occupation without approval and disclosure, failure to follow the prescribed procedures for changing the use of raised funds and failure to timely disclose performance forecasts, among other violations. 

The Jiangsu Regulatory Bureau decided to impose regulatory measures ordering Gotion to correct its actions and recorded the case in the securities and futures market integrity file.

In other words, Gotion has been penalized by regulatory authorities at least twice, making it a "repeat offender."

To sum up, Gotion High-Tech is a military-industrial enterprise that repeatedly violates integrity under the control of the Party Secretary. Its stock price has been continuously declining. Is it not strange that such a company is allowed to invest and build factories in the United States and receive up to $715 million in funding from US taxpayers?

We all know that the recent news of the CCP establishing a spy base in Cuba has caused a great shock in American society. Now think about it, if a company controlled by the CCP penetrates deep into the United States, wouldn't it be effortless for them to conduct surveillance or other activities? And the American people would even have to pay for them to do these.

The oath of a CCP member states, "I voluntarily join the Chinese Communist Party, uphold the Party's principles, abide by the Party's constitution, fulfill the obligations of a Party member, implement the Party's decisions, strictly observe Party discipline, keep Party secrets, be loyal to the Party, work actively, struggle for communism throughout my life, be ready at all times to sacrifice my all for the Party and the people, and never betray the Party."

Now look at this shot again. This is Li Zhen leading the party members of Gotion company to pledge to the CCP on the 100th anniversary of its founding.

If you make a pledge like "implement the Party's decisions, strictly observe Party discipline, keep Party secrets, be loyal to the Party, work actively, struggle for communism throughout my life, be ready at all times to sacrifice my all for the Party and the people, and never betray the Party" in front of the CCP flag, then if the Party tells you to do something, like spying on the secrets of America, would you dare to refuse?

Many Western countries, including the US government, have expressed the need to maintain both cooperation and competition in dealing with the CCP, sometimes cooperating with it, and sometimes treating it as an adversary. Particularly in the case of the Biden administration, for the sake of its so-called green energy policy, it always wants to work with the CCP to achieve certain political achievements.

In my opinion, it's like if you need to build a house, and there's a person who is very skilled at construction, but at the same time, he is a habitual murderer, rapist, and thief. Now, would you say, "I don't care, I'll just use his construction skills to build the house first." Aren't you worried that after he finishes building the house, he will kill your family, rape the women, and steal your belongings?

On the one hand, we say we are pushing back against the CCP, on the other hand, we are cooperating with it and even giving it money. Doesn't that sound like inviting a habitual murderer to build a house?

Alright, the program has been too long. I won't say much more. 

Now I will fulfill the promise I made in the previous episode and play the song that Now, it's time for me to keep the promise I made in the previous episode and play the song produced by Gotion to commemorate the 70th anniversary of the founding of the CCP regime. If you choose not to listen, you are welcome to leave. However, I would suggest that you spare 3 more minutes for some fun and to gain a deeper understanding of what kind of company Gotion is.

Thank you, and see you next time!

6/16/2023**

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