Chapter 6 Cutting Off the Supply Line: The Heavenly Khan's Capital Hunt
The backlash from the "beauty trap" at Linshui Pavilion was like a death knell, tolling over the remaining old guard within the group. Lu Mingyu and Zhao Zifeng were swiftly purged, which also uncovered several small-scale chains of vested interests. The legal and supervisory departments, like sharks smelling blood, launched a deeper investigation and purge with Li Shimin's tacit approval and Wang Yi's support. Suddenly, those who had previously thrived through personal connections and opaque operations were all living in fear and unease.
However, even a centipede with a hundred legs will not fall down easily. Although the core elders, led by Chairman Zhao and Chairman Qian, are temporarily suppressed and dare not openly oppose us, their influence has permeated every corner of the group over the years, especially in some non-core but highly profitable subsidiaries, affiliated companies, and the intricate upstream and downstream supply chains. A head-on, complete eradication would certainly be possible, but it would inevitably cause severe damage, trigger violent upheavals, and even give ambushing competitors an opportunity to exploit.
Li Shimin was clearly not satisfied with merely eliminating a few pawns. What he wanted was to fundamentally dismantle the foundations of these old forces, depriving them of the capital to stir up trouble. His gaze naturally fell on the capital market—a more advanced and ruthless battlefield in modern commercial society.
An opportunity soon arose. A mid-sized listed company called "Xinrui Materials" came into Li Shimin's view. This company was one of the group's important special materials suppliers in East China, possessing certain technological barriers and a stable market share. More importantly, two of its top three shareholders were private equity funds. According to a secret investigation by Wang Yi's team, the actual investors behind them had intricate connections with the families of Chairman Zhao and Chairman Qian. Zhou Wenbin, the chairman and general manager of Xinrui Materials, was even a distant nephew of Chairman Qian. Relying on this relationship and Xinrui's stable supply, he also held a considerable position within the group, serving as a key node for the old guard in the supply chain.
For the past six months, due to the industry downturn and its own management problems, Xinrui Materials' stock price has been declining steadily, and its earnings forecasts are also unsatisfactory, leading to a lack of market confidence. Zhao, Qian, and others seem to be secretly raising funds, attempting to increase their holdings at low prices through related funds, consolidate their control, and wait for the industry to recover.
“This is a breakthrough.” Li Shimin said to Wang Yi and Li Qingyun in his study, looking at the screen displaying Xinrui Materials’ detailed equity structure, financial data, and related-party transactions. Under the light, his young face showed no trace of the impetuousness typical of his age, only the calm and focus of a hunter eyeing his target.
"Dad, you want to acquire Xinrui?" Li Qingyun asked, somewhat surprised. "Although its main business is related to ours, its technological advantage is shrinking, its management is chaotic, and although its valuation has fallen, the costs and risks of acquisition and integration are still significant..."
“It’s not a full acquisition.” Li Shimin interrupted her, his finger tracing several curves on the screen. “Look here, Xinrui’s biggest problem isn’t technology or market, it’s its tight cash flow and the internal strife among the major shareholders. Zhao and Qian want to increase their holdings at a low price to support the stock price, but they don’t have enough funds.” He pulled up a due diligence report he had secretly obtained. “They’ve mortgaged some of their shares to raise funds from several city commercial banks and trust companies, with harsh conditions and huge repayment pressure. And another private equity firm with a large stake, ‘Changhe Capital,’ has recently had a public conflict with Zhou Wenbin and is seeking to exit.”
He looked at Wang Yi: "We need a 'white glove,' an investment company that has no overt connection with us but is reliable enough."
Wang Yi immediately understood: "We're already looking. We've found two companies that meet the criteria: clean backgrounds and reliable operators."
“Okay.” Li Shimin nodded. “The first step is to use a ‘white glove’ approach to acquire Xinrui’s circulating shares in a small-scale, dispersed manner in the secondary market. At the same time, we will contact ‘Changhe Capital’ to express our intention to acquire all or part of its equity. The price can be slightly higher than the market price, but the payment method should be flexible. It can be in installments or by exchanging equity in some of our non-core businesses.”
Li Qingyun seemed to understand: "This is... a siege attack on reinforcements? Creating acquisition rumors to raise stock price expectations and increase the financial pressure on Zhao and Qian to support the stock price? At the same time, it's divisive and weakening the shareholder alliance?"
“Not only that.” A sharp glint flashed in Li Shimin’s eyes. “When we contact ‘Changhe Capital,’ we can ‘casually’ reveal that we have reservations about Zhou Wenbin’s management abilities. If we successfully take over, we cannot rule out the possibility of replacing the management team. This news will ‘naturally’ reach Zhou Wenbin and Zhao and Qian’s ears through certain channels of ‘Changhe Capital.’”
Wang Yi's lips curled slightly: "Zhou Wenbin will inevitably panic and will seek help from Zhao and Qian. Zhao and Qian will either increase their investment to help him maintain his position, or..."
“Either they sacrifice the pawns to save the king,” Li Shimin interjected, his tone indifferent. “Whichever path they choose, their financial chains and resource networks will be exposed more deeply. And we…”
He pulled up another document, which contained a list of several small and medium-sized enterprises that did business with Xinrui and were also suppliers to the group. "Among these customers and competitors of Xinrui, we selected two companies with decent fundamentals, but which were also affected by the cycle and were short of funds. Through another channel, we provided them with short-term bridge loans or order support. One of the conditions was that they were required to appropriately delay their payment terms to Xinrui, or switch to other suppliers we designated for trial orders."
Li Qingyun gasped. This was a devastating blow! Not only were they putting pressure on Xinrui from the capital market, but they were also cutting off its cash flow at the business level!
“Furthermore,” Li Shimin tapped his finger on the table, “the group’s audit and compliance departments can ‘routinely’ conduct a new round of compliance reviews of major suppliers. Xinrui Materials is naturally at the top of the list. The review standards can be slightly…stricter, especially regarding related-party transactions, environmental compliance, and safety production records.”
Wang Yi added, "The tax and business registration authorities can also give a 'friendly reminder' that there will be spot checks on certain key industries in the near future."
Each instruction was clear and specific, forming a comprehensive and multi-layered hunting net. Capital market games, business squeezes, compliance reviews, and even potential administrative risks... every move hit the opponent's sore spot, yet all were cloaked in a legal and commercial guise.
For the next two months, Xinrui Materials seemed to be trapped in a nightmare from which it could not wake up.
First, the stock price inexplicably saw a gentle increase in trading volume from its low level, and rumors began circulating in the market that mysterious funds were bullish on the stock and that a merger or restructuring might be involved. Then, news spread that "Changhe Capital" intended to transfer its shares; although unconfirmed, it sparked speculation. Zhou Wenbin couldn't sit still. He used his connections to gather information while frequently seeking help from Chairman Zhao and Chairman Qian, requesting that the funds they controlled increase their buying power to stabilize the stock price and maintain control.
Chairman Zhao and Chairman Qian gritted their teeth and mobilized more funds to support the stock price, but it was a drop in the ocean. After a brief surge, the stock price turned downwards again after the company released a disappointing quarterly forecast, trapping their newly invested funds. To make matters worse, several major customers suddenly delayed payments for various reasons, and new orders began to slip away. The company's cash flow deteriorated rapidly.
Just then, the group's audit department sent a "re-audit notice" and a series of detailed, almost harsh, inquiry letters. Simultaneously, Zhou Wenbin received a "self-inspection reminder" from the tax authorities. Beset by internal and external difficulties, Xinrui Materials' stock price fell below a key support level, and Zhao, Qian, and others who had pledged their shares began receiving margin calls from banks.
Zhou Wenbin was extremely anxious, like an ant on a hot pan. He approached Chairman Zhao and Chairman Qian again, requesting them to provide more financial assistance or to use their connections within the group to persuade the audit and clients to "go easy on him".
In the study, Chairman Zhao and Chairman Qian sat silently, their faces ashen. Their available cash reserves were depleted, and their collateral had reached its limit. As for the group? Li Shimin and Wang Yi had clearly come prepared; the auditing process was flawless, leaving them no room to maneuver. Any forced intervention would only expose more problems.
“That Li Shimin… he’s trying to wipe us out!” Chairman Qian pounded the table, his voice hoarse.
Chairman Zhao's eyes turned sinister: "He not only wants Xinrui, he's using Xinrui as a scapegoat, making an example of them! He's telling everyone that this is what happens if you associate with us!"
"What do we do now? What about Zhou Wenbin..."
"Give up," Chairman Zhao spat out the words through gritted teeth, as if he had aged ten years in an instant. "We're barely able to take care of ourselves right now. Tell Wenbin to... take care of himself. Try to sell his shares for a good price to fill the hole."
When the order to sacrifice the pawn to save the king reached Zhou Wenbin, his last hope was shattered. Under immense financial pressure and beset by internal and external difficulties, he had no choice but to secretly contact potential buyers, including the "front man" investment company that had always maintained a distant relationship.
Negotiations progressed rapidly. The "front company" offered an acquisition plan slightly higher than the current market price, but far lower than Zhao and Qian's cost of maintaining the stock price, on the condition of accepting the entire deal and assuming some of the debt. Exhausted, Zhou Wenbin agreed with little resistance. Meanwhile, Changhe Capital had earlier transferred its shares to the same "front company" at a relatively reasonable price.
Thus, this "front-door" investment company quietly became the largest shareholder of Xinrui Materials through secondary market acquisitions and negotiated transfers. Immediately after the acquisition, it announced a reorganization of the board of directors, with Zhou Wenbin stepping down and a new management team taking over. It also released positive news about reaching a strategic cooperation agreement with "a large industrial group" (alluding to Yihua Group) and securing long-term orders and financial support.
Xinrui Materials' stock price surged in response, quickly recovering from its trough. The market was in an uproar, marveling at this discreet and precise capital operation.
Meanwhile, Chairman Zhao and Chairman Qian watched helplessly as their hard-earned money was deeply trapped, as a crucial link in the supply chain changed hands, and as Li Shimin effortlessly severed one of their vital arms, while also reaping enormous profits. They not only suffered heavy losses, but their prestige was also completely destroyed.
What terrified them even more was that this "operation" against Xinrui demonstrated a comprehensive ability to utilize capital, business, human nature, and even rules that they could not possibly match. It was not merely a business tactic, but more like a high-level strategic crushing.
When the news reached Li Shimin, he was teaching his youngest daughter, Li Shuyao, to play Go. After listening to Wang Yi's brief report, he simply grunted and placed a black stone steadily on a crucial spot on the board.
“Shuyao, look,” he pointed to the chessboard, “this is called ‘momentum.’ Once the overall momentum is established, the side branches and minor branches will collapse without any attack.”
Li Shuyao nodded as if she understood, but her gaze was involuntarily drawn to the certainty and composure with which her father placed his piece.
Wang Yi stood at the study door, watching the father and daughter's figures under the lamplight, her heart churning with emotion. She knew that after this battle, those remaining forces within the group who had tried to rely on their seniority or feign compliance would completely lose the courage and resources to resist. Li Shimin had used a textbook example of a capital-driven siege to deliver the final blow to the old internal structure.
He was not only an emperor who could control the court, but also a top hunter who could master the modern capital market.
His gaze, however, seemed to have already turned to a wider battlefield. After internal purges, it would be time to expand his territory externally.
The Khan's journey will never end in a single courtyard.
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