Chinese Studio Huayi Brothers Probed Over Possible Disclosure Irregularities

Huayi Brothers CEO Wang Zhonglei

The Shenzhen Stock Exchange is said to be investigating whether the company broke market rules by announcing recent acquisitions to the media instead of via formal channels.

The Shenzhen Stock Exchange is investigating Chinese film studio Huayi Brothers over possible disclosure irregularities in the wake of its recent acquisition of two companies.

The China Securities Regulatory Commission said in a statement that the Beijing-based media company was being probed over "whether it released information by doing interviews with the media, instead of by taking the formal path of information disclosure," according to state-backed daily, Global Times.

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On Sept. 9, Huayi Brothers announced that it was purchasing a 20 percent stake in a cinema management company based in China's Jiangsu Province for $34.32 million (210 million yuan). The week prior, Huayi said it would pay $41 million (252 million yuan) for 70 percent of a television production company based in China's Zhejiang Province.

Huayi Brothers' stock price rose 37.2 percent on the Shanghai Stock Exchange from Sept. 1-13, according to Global Times

The deals have been seen as an attempt by the company to further diversify its business beyond high-risk feature film production.

The Shenzhen bourse did not reveal which deal -- or whether both -- had provoked notice. According to sources cited by Global Times, if the violation is deemed serious, it could derail the planned deal(s). 

Huayi Brothers was founded in 1996 by brothers Wang Zhongjun and Wang Zhonglei.

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The company was behind Jackie Chan's Chinese box-office smash hit CZ12, which pulled in $138 million earlier this year. The studio announced two upcoming Chan pictures -- New York set action thriller, Manhattan, and Wolf Flag, set in the Chinese desserts -- at the Shanghai Film Festival in June. And at the Cannes Film Festival in May, the company unveiled a co-production and distribution agreement with QED International. The partners will first work together on the release of David Ayer’s World War II film Fury -- starring Brad Pitt, Shia Labeouf – which Huayi will distribute in China.

Huayi's next major release is director Tsui Hark’s Young Detective Dee: Rise of the Sea Dragons slated to open in China on Sept. 28, followed by Kenneth Bi’s Control, due out in China on Nov. 18.