(Yicai) Dec. 9 -- Shares of Zhejiang Sunriver Culture, Anhui Gourgen Traffic Construction, and Haichang Ocean Park Holdings plunged despite the three Chinese firms denying they are involved in the financial product redemption scandal of their controlling shareholder Sunriver Holding Group.

Sunriver Culture [SHA: 600576] was trading down 6.4 percent as of 1.10 p.m. today, after plunging 3.6 percent yesterday. Gourgen Traffic [SHA: 603815] dropped by the 10 percent daily trading limit both today and yesterday. Haichang Ocean Park [HKG: 2255] has fallen 7 percent today, after dropping 3.8 percent yesterday.

There have been some delays in the payment of the financial product linked to a real estate cooperation project of Sunriver Group, and the company and its actual controller Yu Faxiang bear joint and several liability for the payment obligations, the three listed firms announced on Dec. 7, clarifying that they have nothing to do with the matter.

“In the past, real estate sales could reach CNY20 billion to CNY30 billion (USD2.8 billion to USD4.2 billion),” Shen Baoshan, executive president of Sunriver Group, told investors. “As the profit margin of the company’s cultural tourism business was meager, real estate was its main source of profit.”

Sunriver Group-backed firms admitted at a meeting with investors yesterday that they had borrowed new loans to repay old debts, as the capital chain has broken, with real estate assets worth CNY30 billion failing to sell, Yicai learned from investors.

Sunriver Group has about CNY60 billion in assets and about CNY40 billion in liabilities, which shows there are no problems with payments, but the core issue lies in the cash flow, Shen said earlier.

Investors expect annualized returns of 4 percent to 5 percent on the wealth management products of Sunriver Group they bought on financial asset trading platform Zhejiang Zhejin Asset Operation. One of them claims there is still CNY5.5 million (USD777,970) of principal that has not yet matured.

According to the product registration form on Zhejin Asset Operation, the total amount of Sunriver Group funds awaiting redemption has exceeded CNY10 billion. They mostly expire between the end of this year and the first quarter of next year.

Shaoxing Chengxu, the seller of the involved financial product, and the debtor, Shiyan Sunriver Taijihu Real Estate, are affiliated companies of Sunriver Holding, per information on Zhejin Asset Operation. They are guaranteed by Sunriver Group and Yu Faxiang with joint and several liability.

Sunriver Group’s contracted sales dropped from CNY6.4 billion (USD905.3 million) in 2023 to CNY3.6 billion last year, and they were only CNY1.2 billion in the first half of this year, according to reports.

Sunriver Group spent about HKD2.3 billion (USD295.7 million) to buy Haichang Ocean Park and become its controlling shareholder. Haichang Ocean Park has suffered losses for the past three years, with total losses of over CNY2.3 billion.

Meanwhile, Sunriver Culture has reported net profits of only CNY370 million (USD52.3 million) in the past five years.

The pledge ratio of Sunriver Culture is 95.6 percent, and that of the top four shareholders of Gourgen Traffic is 83 percent, according to financial data provider Wind Information.

Editor: Futura Costaglione