Huayi Bros.’ Dennis Wang Makes Reassurances, Promises Stock Purchases

Dennis Wang, founder and chairman of Chinese film conglomerate Huayi Brothers Media, Monday said that he will invest some $16 million (RMB100 million) in the company over the next year. The move is intended to bolster confidence after the company was recently rocked by a celebrity scandal.

Wang, the elder and more reclusive of the two brothers who still head the company, made the announcement in a regulatory filing. He owns 22% of the company, and is famous for having spent $61 million on a painting by Vincent van Gogh in December 2014.

His planned purchasing is: “based on the firm confidence in the company’s continued stable future development, and the recognition of the company’s intrinsic value, and in order to enhance investor confidence, and effectively safeguard the interests of small and medium shareholders,” the filing said.

Since the beginning of June, the company’s shares have dived 21%, following the painfully public spat that started when TV host Cui Yongyuan published online the details of a contract with leading actress Fan Bingbing. Cui’s allegations suggested that Fan was disguising a more than $9 million payday, through surreptitious use of two contracts, supposedly on an upcoming film produced by Huayi.

Huayi and Fan have vigorously denied the allegations, and may be taking steps to sue the social media that first spread Cui’s claims. Nevertheless, China’s tax inspectorates has stepped in, saying that it plans to investigate the use of so-called Yin and Yang contracts in the film industry.

Lawyers Matthew Dresden and Sara Xi, at Harris Bricken, have pointed out that there may be multiple legitimate reasons for split contracts, such as Fan’s being hired through her own company, and being a producer on the movie.

That logic, and the crumbling evidence presented by Cui, have done little to quiet the rumor mill in the Chinese industry. In another regulatory filing last week, Huayi said that Dennis and brother James Wang had pledged the majority of their shares as security against personal loans.

Huayi kicked off the Shanghai film festival on Friday with an announcement of its distribution slate. Gossips, however, were quick to note that no major government figures were present at the event. That has been interpreted as a sign that Huayi is out of political and financial favor.