(Yicai Global) April 30 -- Shares in Beijing Jingxi Culture & Tourism, which distributed big-screen blockbuster Wolf Warrior 2, slumped by the 10 percent daily down limit this morning despite rebuffing claims from a former vice chairman that its top executives were engaging in financial fraud.

Its stock [SHE:000802] opened at CNY6.92 (98 US cents) and has remained there since, despite peaking as high as 9.2 percent up yesterday after revealing its 2019 earnings. It lost CNY2.3 billion (USD325 million), its first deficit since 2008, on revenue of just CNY855 million (USD121 million).

Accuser Lou Xiaoxi has fled China on suspicion of misappropriating funds and his claims are not true, Beijing Culture said in a statement last night after Lou posted his allegations on social media. The Chaoyang branch of the Beijing Public Security Bureau has been investigating him since Jan. 19 and the firm is co-operating with the inquiry, it added.

Lou said on Weibo that company Chairman Song Ge and Vice President Zhang Yunlong, who heads up the accounting team, were damaging the interests of the company through fraudulent bond issues, illegal disclosure, non-disclosure and duty encroachment. He has reported their alleged misdeeds to the China Securities Regulatory Commission.

Beijing Culture announced Lou’s resignation from the company in August, but said he would stay on as chairman of subsidiary Beijing Century Partner Culture & Media. The parent bought Century Partner in 2016 to expand from the tourism business to entertainment and it contributed CYN630 million to the group’s 2019 loss.

Song embezzled company money to help a firm owned by others but controlled by himself to win a valuation adjustment mechanism agreement with investors between 2016 and 2017, Lou claims. In 2018, he issued convertible bonds via a public placement and embezzled money in subsidiaries, including Century Partner, to buy shares from senior executives leaving the firm, according to Lou, who also says Song rented out offices at above market rates to earn profits for his relatives.

Beijing Culture made a provision of CNY834 million for good will impairment in Century Partner in its 2019 report, citing difficulties in the television drama industry and the loss of the subsidiary’s original management team. It says this resulted in a lack of core competitiveness and a decline in business performance and that the company planned to sell all equity in the unit to Beijing Fuyi Xingda Cultural Development for CNY48 million (USD6.8 million), which Lou says is an attempt to sugarcoat the 2019 annual loss. The firm paid CNY1.4 billion for the unit.

Editor: James Boynton