(Yicai Global) June 16 -- The actual controller of Shanghai DZH, which supplies internet financial information services, sold CNY179 million (USD25.1 million) of its shares to fund the firm’s compensation to investors over securities misinterpretation.

Zhang Changhong sold 20.3 million shares in DZH between April and May, cutting his stake to 33.6 percent from 34.6 percent, the Shanghai-based firm announced late yesterday. The proceeds will be used to recompense DZH’s investors.

In July 2016, the China Securities Regulatory Commission punished DZH for having disclosed inflated profits in its 2013 earnings report. As a result, investors filed lawsuits against DZH, claiming that misrepresentation caused them losses.

In November 2021, the China Securities Investor Service Center, on behalf of DZH, sued five executives at DZH, including Zhang, for CNY325 million in the country’s first case of a company against its own directors and supervisors. The sum was later changed to CNY335 million, which is the amount DZH paid to compensate investors.

On Feb. 20, DZH reached a settlement with Zhang for him to pay the firm CNY335 million to cover the cost of the compensation. The following day, DZH released a share reduction plan, according to which Zhang would sell up to 122 million of shares between March 16 and Sept. 15, equal to 6 percent of the total.

The latest statement showed that Zhang still owes DZH CNY156 million, and his stake fell by 1 percentage point after the first block sale of shares. As DZH’s share price has gained over 30 percent so far this year, he may part with fewer to raise the CNY335 million.

DZH’s shares [SHA: 601519] fell 1.2 percent to close at CNY7.37 (USD1.03) each today. The broader Shanghai market rose 0.6 percent.

For the first quarter of this year, DZH turned a year-earlier loss into a CNY305 million net profit. Operating income rose 9.1 percent to CNY168 million.

Editor: Futura Costaglione