By TANG Zhuoya

Shenzhen Stock Exchange has announced that SKG Health Technologies Group has terminated its IPO process. Although SKG has not disclosed reasons, some insights can be gleaned from its current operating conditions.

SKG's main products are wearable and portable massagers. Its neck massager was once a fad across the internet, sending performance soaring, but that trend is long since passed. Other products like eye and waist massagers have not performed well. The catch-all "macroeconomic downturn" has certainly not helped. Leading to a 12 percent drop in profit last year.

Furthermore, SKG's primary marketing approach is the distribution model and in recent years, the gross profit margin of the model has declined across the retail sector.

Director pay has also been a subject of criticism. Previously, SKG faced a penalty for not providing basic benefits such as social insurance and housing funds to all its employees. According to the prospectus, in 2021, the average salary of SKG's directors (excluding independent directors) was 4.9 million yuan (US$680,000), much higher than a comparable industry average of 1.7 million yuan. 

The company's controlling shareholder, LIU Jie, received 6.8 million yuan in 2021. Other directors received substantial dividends. LIU and his wife own 93 percent of the company's shares. From 2020 to 2022, the pair made around 93 percent of the 365 million yuan paid in dividends, while the company's net profit was only 390 million yuan.