Leading mattress manufacturer Xilinmen faces multiple crises: the company's actual controller is under investigation, and a funding black hole triggers ST warnings

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On the evening of April 1, a well-known domestic mattress industry company, Joyoung? Wait—this is Xilinmen (603008), issued two major announcements back-to-back, stating that both the company and its actual controller, Chen Ayyu, are being investigated by the CSRC for suspected violations of information disclosure laws and regulations.

This news, combined with issues such as the misappropriation of funds by a subsidiary and related-party fund occupation in the past, has thrown this “mattress king,” founded in 1984, into an unprecedented operational and compliance crisis, with its market capitalization of RMB 5.6 billion facing a severe test.

As a representative company in China’s A-share mattress industry, Xilinmen mainly engages in the design, R&D, production, and sales of mattresses, sofas, and supporting bedroom furniture, and has been deeply involved in the industry for nearly 40 years. At one point, it won market recognition for its stable operating performance. However, recently, a series of negative events have erupted one after another, completely breaking the company’s previously steady situation and fully exposing weaknesses in internal controls.

The curtain-raiser of the crisis began on March 27. Xilinmen suddenly announced that the funds in the bank accounts of its wholly?—wait—its controlling subsidiary Xitu Technology Co., Ltd. had been illegally transferred, with a cumulative amount reaching RMB 100 million. After verification, relevant personnel are suspected of illegally misappropriating company funds by taking advantage of their positions. To prevent fund-safety risks, the company applied to the public security authorities for filing and investigation on March 26 and carried out protective freezes on the relevant bank accounts. At the same time, it actively communicated with relevant parties to push for the return of the transferred funds, working to fully safeguard the company’s property safety.

Just when the market had not yet digested the downside related to the misappropriation of subsidiary funds, the two filing announcements issued on the evening of April 1 once again shook the market. Xilinmen clearly stated that, as of now, the company’s production and operating activities are normal, and the directors and senior management personnel are all performing their duties normally. The above filing matters will not have a significant impact on the company’s production and operations, but the market’s confidence in the company has been severely shaken.

In addition to being under investigation and the misappropriation of subsidiary funds, the issue of non-operating fund occupation by related parties has made Xilinmen’s situation even worse. The announcement disclosed on April 1 shows that, after the company’s review, the controlling shareholder and its related parties have engaged in non-operating fund occupation, with the amount involved totaling approximately RMB 478 million. For this reason, Xilinmen and its two wholly owned subsidiaries have already filed a lawsuit and lodged it with the People’s Court of Yuecheng District, Shaoxing, requiring the controlling shareholder and its parties acting in concert to bear the liability for compensating for losses to the company.

It is understood that this fund occupation occurred between 2025 and 2026. The controlling shareholder and its related parties applied for financing with banks under a factoring financing model, using the suppliers’ names to request financing. The funds already paid by Xilinmen and its subsidiaries to the suppliers were ultimately transferred to themselves and designated accounts. According to the disclosure in the announcement, the outstanding balance of the occupied funds cumulatively reached RMB 190 million, exceeding 5% of the absolute value of the company’s latest audited net assets.

This situation directly triggers the red line for risk warnings. According to relevant rules for stock listing on the Shanghai Stock Exchange, if the controlling shareholder and its related parties fail to complete fund repayment or rectification within 1 month, Xilinmen’s stock will be subject to other risk warnings (ST). In addition, the company also has the circumstance that the controlling shareholder and its related parties provided external guarantees in violation of regulations without an approved procedure. If the audit institution issues a non-unqualified opinion on the company’s 2025 annual report as a result, the company’s stock may also face a risk warning related to delisting.

On April 1, Xilinmen’s closing price was RMB 15.2 per share, and its total market capitalization was about RMB 5.6 billion. With multiple negative factors compounding, the subsequent trajectory of the company’s stock price is not optimistic. For investors, the key focus at present should be the progress on clearing the occupied funds, the results of the CSRC’s filing investigation, and the advancement of litigation, and to remain alert to related risks.

From an industry leader to being trapped in multiple crises, Xilinmen’s experience serves as a warning to listed companies: improving internal control systems, standardizing related-party transactions, and strictly adhering to the bottom line of information disclosure are the foundation for a company’s sustained and healthy development. Whether this crisis can be properly resolved not only concerns Xilinmen’s future development, but also sounds a warning bell for corporate governance of listed companies in the domestic home furnishing industry.

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