In 2024, how many companies are queuing up to delist?

The regulator said that the next step should be to increase efforts for mandatory delisting and voluntary delisting

Text: Zhang Yun, Wang Ying

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Yang Xiuhong

With the arrival of the annual report season, a number of listed companies will continue to withdraw from the capital market this year.

Wind data shows that since the beginning of this year, as of the end of March, 72 listed companies in the A-share market have touched the risk of delisting, 9 listed companies have locked in delisting or have been delisted, of which 6 listed companies have completed delisting.

Many of these companies were once darlings of the capital market. ST Guiren (formerly "Guiren Bird"), known as the "National Shoe King", completed its delisting on March 29. In 2014, Guiren Bird was listed with the halo of "the first share of A-share sports brand". The company's market value exceeded 40 billion yuan at its peak, and the founder Lin Tianfu was the richest man in Quanzhou with a net worth of 19 billion yuan in 2015, beating the Shi Wenbo family of Hengan International and Ding Shizhong of Anta Sports.

Time has passed, and when ST Guiren was delisted, the stock price fell to 0.67 yuan per share, with a total market value of 1.1 billion yuan.

In addition to ST nobles, recently, the delisting of Poten and Xinhai has also entered the delisting period, and it is expected to complete the delisting after the expiration of the delisting period. On the first day of the delisting period, the delisted Poten and Xinhai fell by 58% and 69.23% respectively.

Since the beginning of this year, 9 stocks have been locked up or have been delisted.

Wu Qing, chairman of the China Securities Regulatory Commission, talked about the regulatory thinking of the China Securities Regulatory Commission at the 2024 National People's Congress and the National People's Congress. He stressed that in the future, the quality of listed companies will be further promoted, and import supervision, export supervision and continuous supervision will be done. Among them, "export supervision" is to put "increasing the intensity of delisting" into practice.

Wu Qing said, "On the one hand, we will set stricter mandatory delisting standards to achieve all the withdrawals. On the other hand, we will improve policies such as mergers and acquisitions, further broaden diversified exit channels, and encourage some companies to take the initiative to delist. Mandatory delisting and voluntary delisting should be strengthened in the next step. ”

The above-mentioned "improvement of policies such as absorption and merger", as well as the tightening of import supervision, have left a certain space for imagination in the mergers and acquisitions of listed companies. Some market voices believe that backdoor and shell speculation will make a comeback.

However, on March 15, the China Securities Regulatory Commission (CSRC) issued the "Opinions on Strengthening the Supervision of Listed Companies (Trial)" (hereinafter referred to as the "Opinions on the Supervision of Listed Companies"). The opinion clearly states that in the future, the China Securities Regulatory Commission will strengthen the supervision of restructuring and listing, and further reduce the value of "shell".

The "National Shoe King" noble bird was delisted

From February 1 to March 7, 2024, the closing price of ST Guiren's shares was below 1 yuan for 20 consecutive trading days, touching the conditions for termination of listing. On March 29, ST Guiren was officially delisted from the Shanghai Stock Exchange, which also announced the end of its decade-long listing journey.

ST Guiren was suspended on March 7, and the stock price was fixed at 0.67 yuan per share, with a total market value of only 1.1 billion yuan. As of September 30, 2023, the number of shareholders of the company is still 29,200.

Guirenniao was founded in 2004 and is headquartered in Jinjiang City, Fujian Province. In 2014, Guiren Bird was listed with the halo of "the first share of A-share sports brand". The company's market value exceeded 40 billion yuan at its peak, and the founder Lin Tianfu was the richest man in Quanzhou with a net worth of 19 billion yuan in 2015, beating the Shi Wenbo family of Hengan International and Ding Shizhong of Anta Sports.

In the following ten years, Guirenniao did not deeply cultivate its own sportswear brand, but carried out various investment and merger activities around the sports industry, involving sports fund investment, football brokerage, mobile games, e-sports, various sports apps, insurance and other fields.

However, the diversified layout not only did not contribute to the financial report of Guirenniao, but dragged down the overall performance. Its net profit has gradually declined from 332 million yuan in 2015. From 2018 to 2020, Guirenniao lost money for three consecutive years, with net losses of 686 million yuan, 1.096 billion yuan, and 382 million yuan respectively. At the end of 2020, the asset-liability ratio of *ST Guiren rose to 99.26%, making it insolvent.

At that time, because Guirenniao was unable to pay off the debts due, the creditor filed an application for reorganization with the court. In 2021, Guirenniao officially entered the reorganization procedure. Heilongjiang Taifu Jingu Network Technology Co., Ltd. (hereinafter referred to as "Taifu Jingu"), controlled by Li Zhihua, became the investor of the company's reorganization. Taifu Jingu's main business is grain trade, grain supply chain, etc., which also lays the groundwork for the transformation of Guirenniao from sports shoes and clothing to food business.

At the same time, *ST Guiren also incurred a large debt restructuring profit and loss due to reorganization, and turned losses into profits in 2021, achieving a net profit of 361 million yuan, successfully taking off the hat, and the stock abbreviation changed back to "Guiren Bird".

In 2022, the revenue of grain trading business will account for more than half of Guirenniao's revenue. In that year, Li Zhihua became the actual controller and chairman of the noble bird, and the Lin Tianfu family gradually lost the control of the noble bird.

However, the "grain tycoon" in the Northeast failed to become the "nobleman" of the noble bird, and the grain business failed to bring considerable profits to the noble bird. In 2022, Guirenniao will fall into a loss again, with a net loss of 9.4137 million yuan.

At that time, the annual review agency issued a negative opinion on Guirenniao's "2022 Internal Control Audit Report", and pointed out that there were major deficiencies in the company's internal control in the procurement and sales of grain trade, capital activities, etc. Guiren Bird was once again subject to other risk warnings, and the abbreviation became ST Guiren.

In September 2023, ST Guiren announced that in view of the declining revenue and continuous losses of the company's sports shoes and apparel business since the judicial reorganization, and the increasingly fierce market competition, it will dispose of brand assets such as "Guirenniao" and "Prince" and other related assets of sports shoes and apparel through including but not limited to licensing, selling, leasing, etc., and gradually withdraw from the sports shoes and apparel business, with the food business as the main business development direction in the future.

On January 26 this year, the 2023 performance forecast disclosed by ST Guiren showed that the net profit attributable to shareholders of listed companies in 2023 is expected to be -485 million yuan, and the non-net profit will be -495 million yuan, which is an increase in loss over the same period. There are two main reasons for the loss, one is the lack of effective market demand, and the market competition pressure in the grain industry and sports shoes and clothing industry in which the company is located is greater;

After the news was released, ST Guiren's share price continued to fall to the limit, and finally fell to the warning line of 1 yuan per share, and then triggered the delisting conditions.

Although ST Guiren was delisted, the matter is not over.

The Shanghai Stock Exchange previously issued a regulatory work letter to ST Guiren, clearly pointing out that its controlling shareholders, senior executives and actual controllers still have obligations that have not been fulfilled, and delisting does not mean that they can be "withdrawn": first, the shareholding increase plan promised by the controlling shareholders and senior executives will not be exempted from liability due to the company's delisting; second, the enterprises controlled by the actual controller must return 166 million yuan to ST Guiren and should strictly fulfill the obligation to return the return; third, the compensation obligation of the reorganization performance commitment of the original controlling shareholder of ST Guiren has not been fulfilled.

In January 2024, ST Guiren received the "Decision on Administrative Supervision Measures" issued by the Fujian Securities Regulatory Bureau. It is understood that from 2021 to 2023, Guirenniao and the four companies indirectly controlled by Li Zhihua had procurement transactions totaling about 880 million yuan, but they did not disclose the related party transactions with the above four companies in a timely manner as required, nor did they disclose them in the regular report. The Fujian Securities Regulatory Bureau decided to order Guirenniao to make corrections and issue a warning letter, and to take regulatory talks and issue warning letters to the relevant responsible persons.

In February this year, ST nobles and the company's chairman Li Zhihua were investigated by the China Securities Regulatory Commission on suspicion of illegal information disclosure.

This year, the companies that have been locked in and delisted are not only ST nobles. According to public information statistics, 9 stocks have been locked in and delisted or have completed delisting this year, namely Xinhai Delisting, Delisting Potian, ST Guiren, ST Xingyuan, *ST Huayi, *ST Bolong, *ST Oceanwide, *ST Aidi, and ST Hongda. Among them, Xinhai delisting and delisting Botian touched major violations of the law and forced delisting, and the rest belonged to the trading forced delisting.

Among them, Xinhai entered the delisting period on March 26. On February 5, the company received the "Administrative Penalty Decision" issued by the China Securities Regulatory Commission, and was found to have false records in the annual reports from 2014 to 2019, during which the sales revenue was inflated by 3.7 billion yuan and the total profit was inflated by 560 million yuan, which touched the situation of forced delisting in major violations. This is also the first case of forced delisting in a major violation of the law this year.

More than 70 companies are at risk of delisting

With the release of annual reports, there are still a number of listed companies struggling on the verge of delisting this year, and the future is worrying.

Wind data shows that there are already a number of listed companies that may trigger delisting conditions when the annual report has not yet been fully disclosed. Among them, as of the third quarter of 2023, there are 26 listed companies that have triggered the net profit, operating income and portfolio indicators of the portfolio in 2023 that are less than 100 million yuan, 29 listed companies with negative audited net assets in the most recent fiscal year, 14 listed companies that have been issued with no opinion or negative opinion in the most recent fiscal year, and 24 ST shares that trigger the "risk of possible suspension of listing".

Among these listed companies, there is a situation where one company triggers multiple risks, and after the merger of companies that touch multiple risks, according to incomplete statistics from Caijing, there are 72 listed companies with one or more delisting risks.

Different from 2023, the listed companies that may be delisted this year are concentrated in the pharmaceutical and biological industries, and the reasons involved are mainly related to the net profit and operating income indicators in the financial delisting.

"Innovative drug companies have the characteristics of large R&D investment and long return on investment cycle. Whether the R&D results can be successfully transformed, and there are also uncertainties in the construction and maintenance of drug sales channels. In addition, in recent years, industry policies such as medical insurance fee control and centralized drug procurement, as well as the intensification of competition caused by market opening, will put pressure on the profitability of innovative drug companies. A pharmaceutical industry researcher said.

It should be noted that there is still a certain difference between the triggering of delisting conditions for listed companies and the actual implementation of delisting, and the specific delisting scale can only be fully determined after the annual report data is released and confirmed by the exchange.

Wu Qing, the new chairman of the China Securities Regulatory Commission, said during the two sessions that for the exit mechanism, "on the one hand, set stricter mandatory delisting standards, so that all should be withdrawn." On the other hand, we will improve policies such as mergers and acquisitions, further broaden diversified exit channels, and encourage some companies to take the initiative to delist. Mandatory delisting and voluntary delisting should be strengthened in the next step. ”

Will mergers and acquisitions become another way out for listed companies that trigger delisting risks?

On March 15, the China Securities Regulatory Commission stated in the "Opinions on the Supervision of Listed Companies" that it "supports listed companies to enhance their investment value through mergers and acquisitions." Take multiple measures to activate the M&A and restructuring market, and encourage listed companies to comprehensively use shares, cash, directional convertible bonds and other tools to implement M&A and restructuring, and inject high-quality assets. Guide the parties to the transaction to reasonably determine the transaction price on the basis of market-oriented negotiation. Support mergers and acquisitions between listed companies. Optimize the 'small amount fast' review mechanism for restructuring, and study the rapid review of the restructuring of high-quality large-capitalization companies. ”

However, it should be noted that the CSRC also made it clear that in the future, the CSRC will strengthen the supervision of restructuring and listing and further reduce the value of the "shell". In other words, supporting mergers and acquisitions, improving the absorption and merger policy, and further broadening multiple exit channels do not mean that the regulator tolerates the comeback of backdoor and shell speculation.

Wind data shows that since the beginning of this year, as of the end of March, there have been 60 listed companies that have updated the progress of major restructuring events, while this number is only 18 in the same period in 2023.

Most of the above-mentioned major restructuring matters are due to the horizontal integration of listed companies. In addition, the purpose of the restructuring of a very small number of listed companies is to buy a backdoor listing, and the data shows that in the past year, six of the 11 restructuring matters aimed at "buying a backdoor listing" have failed. Among them, only CCCC Design completed the backdoor listing, and the company is a central state-owned enterprise. Three other listed companies are going through the CSRC process, namely Luchang Technology, Dalian Thermal Power and Hengli Petrochemical.

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