Xilinmen's "Home" Sudden Change: Founder Sued for Illegally Misappropriating Funds

(Source: Damo Finance)

Produced by | Damo Finance

The leading player in the mattress industry, Xihimen (603008.SH), has recently been pulled into a “family upheaval” controversy.

On April 3, A-share “mattress No. 1 stock” Xihimen (603008.SH) hit the daily limit down for the second consecutive day, closing at 12.31 yuan per share; the company’s market capitalization was 4.534 billion yuan.

This limit-down move began with an “insider sabotage case” announcement.

On March 27, Xihimen suddenly issued an announcement, saying that the bank account funds of its controlling subsidiary, Xitu Technology, had been illegally misappropriated by insiders, with a cumulative amount totaling as much as 100 million yuan. The company reported to the public security authorities on March 26, and implemented protective judicial asset freezes on the relevant accounts, involving a total amount of over 900 million yuan. When combined, the two figures total over 1 billion yuan, accounting for 42.69% of its monetary funds in 2024.

It is also worth noting that Xihimen’s share price has shown a clear downward trend since March 20 this year, and to date it has fallen for 11 trading days, wiping out 42% of its market value.

After Xihimen released the announcement, the Shanghai Stock Exchange sent a regulatory work letter that same night, requiring the company to conduct a comprehensive self-examination. And this self-examination fully brought Xihimen’s internal risk issues to light.

On the evening of April 1, Xihimen released multiple major announcements in succession. Among them, two stated that the China Securities Regulatory Commission would file a case for investigation into Xihimen and its actual controller Chen Aiyu; one concerned the judicial freezing of shares held by the controlling shareholder and its parties acting in concert; and another was Xihimen’s “complaint.”

The announcements show that Xihimen and its two subsidiaries (Shunxi Company, Yingxi Company) jointly filed a lawsuit for disputes over liability for damage to the interests of the company, suing the controlling shareholder Zhejiang Huayi Intelligent Manufacturing Co., Ltd. (hereinafter “Huayi Intelligent Manufacturing”), the party acting in concert Shaoxing Yuecheng Huahan Equity Investment Partnership (Limited Partnership) (hereinafter “Huahan Investment”), and the actual controller Chen Aiyu, and seeking compensation of 478 million yuan from the defendants.

Even more noteworthy is that in the above announcements, Xihimen disclosed on its own that the balances of non-operational occupation of listed-company funds by the three defendants were nearly 190 million yuan, and that the amount had already exceeded the absolute value of 5% or more of the company’s most recently audited net assets. This creates the risk that the company’s stock may be subject to other risk warnings (with “ST” prefixed to the stock abbreviation).

On April 2, Xihimen further issued an announcement stating that, as of now, all 8.107 million shares personally held by Chen Aiyu have been fully judicially frozen; Huayi Intelligent Manufacturing and Huahan Investment have had 20.8429 million shares and 8.4 million shares frozen, respectively—representing 24.58% and 22.82% of the shares they hold.

A misappropriation incident involving 100 million yuan was thus revealed, exposing the hidden wrongdoing in which Xihimen’s three defendant-shareholder parties illegally occupied a huge amount of funds, eroding the company and the rights and interests of other shareholders.

The founder becomes “a family thief”

The key figure at the center of this crisis is Xihimen’s founder and chairman, Chen Aiyu.

In 1984, Chen Aiyu started from scratch to establish Xihimen; in 2012, he led Xihimen to successfully list on the Shanghai Stock Exchange, becoming China’s first A-share listed company in the mattress industry, known as “China’s mattress No. 1 stock.” Starting in 2021, Chen Aiyu’s children entered Xihimen’s board of directors, forming a family governance structure in which Chen Aiyu serves as chairman, his son Chen Yicheng serves as vice chairman, and his daughter Chen Pingqi serves as a non-independent director.

However, in this crisis, Chen Aiyu’s role changed from founder to defendant. To take the company he himself founded to court is extremely rare in capital markets.

The litigation announcement shows that this case mainly involves three “core parties,” namely the controlling shareholder Huayi Intelligent Manufacturing, Huahan Investment, one of the parties acting in concert with the controlling shareholder, and the actual controller Chen Aiyu, who hold 84.7997 million shares, 36.8079 million shares, and 8.107 million shares of Xihimen, respectively—representing 23.03%, 9.99%, and 2.20% of the shares. In addition, Chen Aiyu and his children also hold 4.1956 million shares of the company—about 1.14%—through the “Shaanxi Guotou · Jinyu No. 201 Securities Investment Collective Trust Plan.”

As the case progressed, the relationships among the three major core defendants became clear. They do not exist in isolation; rather, they are deeply bound through equity and family ties.

Huayi Intelligent Manufacturing is jointly held by Chen Aiyu and his children Chen Yicheng and Chen Pingqi, as well as by Pingxiang City’s State-owned Assets Supervision and Administration Commission’s wholly owned company. Among them, the three members of Chen Aiyu’s family together hold as much as 74.57%, and Chen Aiyu is the actual controller.

Huahan Investment is the private equity investment platform of Chen Aiyu’s family. According to Qichacha, Huayi Intelligent Manufacturing holds 40% equity in it.

Backroom manipulation

According to disclosures in the complaint, Chen Aiyu and the defendant companies occupied listed-company funds through two methods.

The first is a loan-to-reloan model. In 2026, for operational needs, Xihimen and its subsidiaries applied to banks for loans; however, the defendants intercepted the credit funds through a “loan-to-reloan” business model. Among them, Xihimen involves 15 million yuan, and the subsidiary Yingxi Company involves 57 million yuan. In total, 72 million yuan was transferred to the defendant side, and to date it has not been repaid.

The second is a factoring financing model, which is also the core method of the funds occupation in this case. Between 2025 and 2026, Xihimen, on its side, carried out factoring financing to ease suppliers’ funding pressure. Taking advantage of this model, the defendants applied to banks for financing in the name of suppliers; the funds ultimately flowed to related parties such as Huahan Investment and Huayi Intelligent Manufacturing, as well as their designated accounts, for a total amount of about 406 million yuan.

That is to say, in this transaction, the money was borrowed by Chen Aiyu, while the repayment obligation still remained with the listed company.

As of the date of the announcement, due to the maturity of certain accounts payable, Xihimen has already actually assumed payment obligations of 63.5512 million yuan to banks. Its wholly owned subsidiary Shunxi Company has also already actually assumed payment obligations of 54.0135 million yuan to banks. In total, the company has advanced nearly 118 million yuan.

These two operations combined led to a balance of non-operational occupation of listed-company funds by the controlling shareholder reaching 190 million yuan. Besides the high amount, they also buried “ST” risks for Xihimen.

In addition, Xihimen stated in the announcement that if, as a result of this incident, the company’s audit institution issues non-nonqualified opinions regarding the effectiveness of internal control over the financial report as of December 31, 2025 and the company’s 2025 annual audit report, then the company’s stock may be subject to other risk warnings or delisting risk warnings after the disclosure of the 2025 annual report.

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