It should be retreated! Delisting supervision is strongly sinking, and problem companies are accelerating "liquidation"

Some*ST companies' 2021 annual reports are scheduled to be disclosed

□ local securities regulatory bureaus to strengthen the supervision and reminder of listed companies and auditing institutions before the disclosure of annual reports.

The audit verification opinions issued by □ auditing institutions have become an important starting point for the supervision of financial delisting.

With the normalization of the "export-side" delisting mechanism, speculative arbitrage in the ST sector is gradually declining. What has attracted much attention is that this year will produce the first batch of delisted companies under the new delisting regulations, and the number of companies that "leave" may exceed the past.

Asking quickly and deeply shows the strength of the regulatory authorities. The reporter noted that after a number of *ST companies issued an annual performance forecast or delisting risk warning announcement in January this year, the Shanghai and Shenzhen exchanges will quickly issue a letter of concern or inquiry to the relevant companies on the same day or the next day, and even directly ask whether the company has evaded the delisting.

"The previous stage of the centralized release of inquiry letters and concern letters to *ST companies should be just the beginning, which can be seen as a clear signal issued by the regulatory authorities." The regulatory authorities have taken the delisting supervision as the top priority of the supervision line of listed companies this year, and the regulatory departments at all levels will also concentrate their energy and resources to ensure that 'they should retire as much as possible', achieve 'retreat and stability', and make every effort to fight the battle of delisting supervision. Some insiders told reporters that investors must be cautious about investing in the ST sector.

The "*ST" shell protection difficulties

At a time of life and death, in order to win a glimmer of life, some *ST companies are still trying to take the shell shortcut of dressing up performance. In this regard, the regulatory authorities attacked in the line of fire, pointing directly to the problem of "seven inches".

On the first working day of the Year of the Tiger (February 7), *ST Bus, *ST Danbang, *ST Contemporary and other companies received inquiries or letters of concern from the regulatory authorities for related shell matters.

With the help of the controlling shareholder, *ST Bus released its annual report on January 29, showing that the company has turned a profit. Thanks to the 100% equity of Zhongtian Meimei Service donated by the controlling shareholder, *ST Bus's property management revenue in 2021 accounted for 88.13% of the annual revenue. The confident *ST Bus immediately submitted an application to the Shenzhen Stock Exchange to revoke the delisting risk warning.

However, the Shenzhen Stock Exchange issued an annual report inquiry letter to the company, raising 11 sharp questions, which required *ST Bus to explain whether there was a situation of adjusting profits or revenue across periods at the end of the year, and whether there was a situation of circumventing the termination of listing.

Looking at *ST Danbang, the company announced on January 29 that it expects operating income of 110 million yuan to 120 million yuan in 2021. Although the company's net profit in the same period is still a loss, the revenue has crossed the "red line" of 100 million yuan, and the intention of shell protection is very obvious.

In the face of the "abrupt" sharp increase in *ST Danbang's revenue in the fourth quarter of last year, the latest letter of concern of the Shenzhen Stock Exchange requires the company to detail the reasons and rationality of the changes in financial indicators such as operating income and net profit in the fourth quarter of 2021, whether the substantial increase in revenue in the fourth quarter is in line with the industry law, and whether there is a situation in which the total amount method is used instead of the net amount method to recognize revenue. At the same time, the company is explicitly required to explain whether there is a situation of adjusting revenue to avoid the termination of listing. It is worth mentioning that in November 2021, before the preparation of the annual report began, *ST Danbang received a letter of regulatory concern due to the temporary change of the audit agency.

A total of 321 million yuan of equity and cash assets donated by the actual controller may make *ST Contemporary's net assets at the end of 2021 positive. The old-fashioned shell protection trick quickly attracted the attention of the regulatory authorities. The Shenzhen Stock Exchange asked the company to explain whether it was necessary and reasonable for the controlling shareholder to donate assets.

In fact, for a number of "old and difficult" companies in the ST camp, the regulatory authorities have always maintained a close focus. On the evening of January 28, *ST Haichuang released its 2021 annual performance forecast, of which the expected operating income is 109 million yuan to 123 million yuan, just "over the line".

Less than 1 hour after *ST Haichuang disclosed the performance forecast, the Shanghai Stock Exchange immediately issued an inquiry letter to it, asking the company to explain the reasons and rationality of the substantial increase in operating income in 2021, and fully reminding the possible risk of termination of listing.

Some companies are at risk

The financial indicators set by the new delisting regulations are a hard threshold for zombie enterprises. Among them, companies such as *ST Zhongxin, which trigger the financial combined delisting standard, are hanging in the balance.

According to the combined delisting indicator of "the lower net profit before and after deducting non-recurring gains and losses and the operating income is less than 100 million yuan", if the 2021 annual report of "*ST" continues to touch the delisting indicator, it will be directly delisted. According to the performance forecast released by *ST Zhongxin on the evening of January 17, the company's net profit in 2021 may be negative, operating income may be less than 100 million yuan, net assets at the end of the period may be negative, and the delisting alarm has been sounded.

Due to the "punching face" of the accounting firm, *ST Chengxing's shell protection road is not optimistic. On January 28, *ST Chengxing said at the same time as disclosing the pre-increase announcement that it had fully communicated with the accounting firm on matters related to the performance forecast, and there was no disagreement with the accounting firm in terms of performance forecast" . But to the surprise of the market, the relevant accounting firm said that its "basis for the positiveization of net assets is insufficient."

In the evening, the Shanghai Stock Exchange issued an inquiry letter to *ST Chengxing, requiring the company to strictly comply with accounting standards and correct the performance forecast. After the correction, *ST Chengxing's net assets are expected to be negative. This means that when the 2021 annual report is disclosed, the company's shares may be terminated. On February 7, the Shanghai Stock Exchange once again issued an inquiry letter, asking the company to correct the performance forecast as soon as possible and fully warn of the risks.

*ST Xinyi, which is also hovering on the edge of the red line of delisting, tested the bottom line of the revenue deduction rule with a "0 yuan acquisition". To this end, the SSE requested *ST Xinyi to explain the reasons and rationality of the substantial increase in operating income in 2021. In the fourth quarter of 2021, *ST Xinyi accepted the relevant equity of Yixiangyuan at a price of 0 yuan, which aroused widespread concern from the outside world.

Whether it can pass the "financial pass" is uncertain, and there is still a "major illegal delisting pass" hanging above *ST Xinyi's head. According to the disclosure, due to the inflated revenue from 2018 to 2019, *ST Xinyi may touch the situation of major illegal forced delisting. In addition, in January 2022, the public security organs have filed a case for investigation because *ST Xinyi and the company's actual controller Huang Wei are suspected of illegal disclosure and non-disclosure of important information.

Weaving delisting "regulatory network"

In the view of market participants, 2022 is a key year to practice the normalization of the delisting mechanism, under the clear signal of strict supervision, listed companies through various means to avoid delisting operations, will be a "useless work".

By the end of 2021, in the nearly one year since the release of the new delisting rules, a total of 27 A-share listed companies have been delisted, of which 17 have been forcibly delisted. At present, nearly 100 companies have been delisted by the exchange.

"The ecosystem of the capital market is gradually taking shape, and in order to establish a normalized delisting mechanism, the regulatory authorities have set clear work goals." Some market participants told reporters.

The reporter noted that in order to ensure that "all should be withdrawn", in addition to issuing a letter of concern or inquiry, the regulatory authorities also supplemented by on-site inspections to implement "zero tolerance". For example, in the inquiry letters issued to *ST Global and *ST Haichuang, the SSE clearly stated that if the company is suspected of failing to deduct operating income in accordance with regulations and avoiding the termination of listing, it will promptly request regulatory measures such as on-site inspection after the disclosure of the company's 2021 annual report, and discipline the company and relevant responsible persons. "If, according to the final on-site inspection results, the company, after deducting the relevant impact, touches on the termination of listing, the firm will make a decision to terminate the listing of the company in accordance with laws and regulations."

In order to consolidate the "gatekeeper" responsibility of the audit institution, the new delisting rules also clarify that the audit institution of the annual report of the listed company needs to issue a special verification opinion on whether the deduction of the operating income of the listed company is appropriate. Judging from the delisting supervision of the Shanghai Stock Exchange in 2020, the audit verification opinion issued by the audit institution has become an important starting point for the supervision of financial delisting.

Local securities regulatory bureaus have also strengthened the supervision and reminder of listed companies and auditing institutions before the disclosure of annual reports. On January 26, the Shanghai Securities Regulatory Bureau proposed in its practice reminder for the audit of the 2021 annual report of the jurisdiction that when auditing the annual report of an accounting firm, it should pay close attention to whether the listed company avoids delisting through major unconventional transactions, including increasing profits through surprise confirmation of asset transactions, government subsidies, etc.; Suddenly reach a debt forgiveness agreement or asset donation that lacks commercial rationality and may be accompanied by preconditions, so as to achieve an accurate positive conversion of net assets.

On January 25, the Beijing Securities Regulatory Bureau held the "2021 Annual Report Supervision Work Conference for Listed Companies in the Jurisdiction", which also emphasized that listed companies should focus on the new delisting regulations, eliminate the use of accounting methods to adjust and avoid delisting, and must not inflate income, suddenly adjust profits, and use occasional business to increase net assets.

A virtuous circle of capital markets requires a healthy mechanism of entry and exit, survival of the fittest. It is foreseeable that under the background of the comprehensive registration system reform and the continuous illumination of the strong light of supervision, the "confrontation" between delisting supervision and illegal shell protection this year will be more intense than ever.