CFIC Introduction
As of April 30, 24 A-share companies have been "locked" for delisting this year, of which 9 companies have completed delisting and 15 companies have sounded the delisting alarm.
Original title: Strengthen the supervision of delisting, A-share turbidity and YangqingWith the disclosure of the 2023 annual report coming to an end, a number of listed companies have sounded the delisting alarm due to problems such as financial substandards or audit reports that cannot express opinions. As of April 30, 24 A-share companies have been "locked" for delisting this year, of which 9 companies have completed delisting and 15 companies have sounded the delisting alarm. Experts said that the regulatory authorities continue to strengthen the supervision of delisting, increase the "zombie shell" and "black sheep" to clear out, and the benign market ecology of turbidity and clean-up is expected to be formed. In anticipation of the establishment of stricter mandatory delisting standards and the further expansion of multiple exit channels, the liquidation of the A-share market will be further strengthened, promoting the formation of an orderly and timely clearing pattern. Since the beginning of this year, the new delisting regulations have continued to take effect, and 24 A-share companies have been "locked" for delisting, of which 9 companies have completed delisting, and 15 companies have sounded the delisting alarm, forming a pattern of equal emphasis on diversified delisting standards such as trading, finance, and major violations. With the disclosure of the 2023 annual report, a number of listed companies that have touched the financial delisting indicators have appeared. For example, due to the company's 2023 financial and accounting report being issued with an audit report that could not express an opinion, *ST Yuancheng and *ST Tongda received prior notices of their intention to terminate the company's stock listing on April 30. For another example, because the company's audited net profit in 2023 is negative, and the operating income after deducting business income unrelated to the main business and income without commercial substance is less than 100 million yuan, *ST Carbon Yuan received a prior notice of its intention to terminate the company's stock listing on April 30. Industry insiders said that with the end of the disclosure of the 2023 annual report, a number of companies that have implemented delisting risk warnings have joined the delisting list due to the failure to improve their financial indicators. There are also some annual reports that have terminated contracts with accounting firms, "difficult birth companies", or touch the financial delisting standards. "1 yuan delisting" demonstrates the power of market-oriented "clearing" and has become the main channel for the normalized exit of A-share listed companies. As of April 30, more than 10 companies have been "locked" and "delisted for 1 yuan" this year. Among them, *ST Huayi, *ST Bolong, *ST Oceanwide, *ST Aidi, ST Hongda, ST Xingyuan, ST Guiren and other companies have been terminated from listing and delisted. Xu Feng, a lawyer at Shanghai Jiucheng Law Firm, said: "The number of '1 yuan delisting' companies has increased significantly, and the efficiency of A-share survival of the fittest has been significantly improved. This also means that investors are becoming more rational and pay more attention to value investing. "There is an increasing number of cases that hit the mandatory delisting indicators of major violations. Following *ST Xinhai becoming the first case of mandatory delisting for major violations in 2024, *ST Poten was also forced to delist due to major violations and was terminated and delisted on April 25. Guojin Securities Research Report believes that in 2024, the trend of normalized delisting of the A-share market will continue, the market competition environment of survival of the fittest may be further strengthened, and market resources will continue to concentrate on high-quality enterprises. The market ecology continues to be optimized and the regulatory signal of delisting is becoming clearer, and many underperforming stocks are being "voted with their feet" by investors, and the market ecology continues to be optimized. A number of underperforming stocks that have been put on delisting risk alert have seen their stock prices drop significantly after the release of their 2023 annual reports. As of April 30, the ST sector index according to Wind data has fallen by 32.43% year-to-date. "In the context of the normalization of A-share delisting, investors pay more attention to the company's operation and financial status, and reduce their tolerance for violations of laws and regulations and financial risks. Guo Yiming, director of investment consulting of Jufeng Investment Advisory, said. Some companies have tried to protect their shells and avoid delisting, which has also been questioned and concerned by relevant departments. "At present, the 'shell zombie' enterprises that do not have the ability to continue to operate are speeding up their clearance, and the market chaos such as 'raising shells' and 'speculating shells' in the past has been effectively curbed. Speculators will gradually lose their opportunities, and investors need to effectively protect their legitimate rights and interests. Lv Chenglong, an associate professor at the Law School of Shenzhen University, said. In addition, from the perspective of the primary market, compared with the IPO review, the backdoor listing review is more stringent, and the motivation for the company to be listed through the backdoor is insufficient, and the value of shell resources is reduced. "The normalized exit of the A-share market and the continuous optimization of the market ecology benefited from the continuous deepening of reforms. Zhao Xijun, co-dean of the Capital Market Research Institute of Chinese University, said that since the implementation of the delisting reform, the number of forced delistings of listed companies has increased significantly. On April 12, the China Securities Regulatory Commission issued the "Opinions on the Strict Implementation of the Delisting System", which will further reduce the value of "shell" resources, strengthen investor protection, increase delisting, promote the formation of an orderly and timely clearing pattern, and improve the overall quality of the market. Industry insiders expect that the delisting criteria will be stricter. The new delisting rules tighten the financial delisting indicators, broaden the scope of application of mandatory delisting for major violations, add three new normative delisting situations, and improve the market value standard and other trading delisting indicators. Guo Ruiming, director of the Department of Supervision of Listed Companies of the China Securities Regulatory Commission, said that according to estimates, the number of companies that will be delisted by the Shanghai and Shenzhen stock exchanges next year is expected to be about 30 companies that will be delisted by the applicable portfolio financial indicators, and about 100 companies may touch the index and implement delisting risk warnings next year, and these companies still have more than a year and a half to improve their operations and improve quality, and they will be delisted by the end of 2025 if they still do not meet the standards. Frying the "shell" will be more difficult. The new delisting regulations are clear, vigorously reducing the value of "shell" resources, and specific measures include strictly cracking down on market manipulation and insider trading behind "shell speculation", and maintaining trading order. In the view of Wang Yi, chief strategic analyst of Huatai Securities, supporting the absorption and merger of listed companies, increasing the supervision of restructuring and listing, improving the coverage of on-site inspections, and cracking down on "fake restructuring and real shell speculation" will take multiple measures to reduce the value of the shell. Investor protection will also be improved. Investor protection is a difficult point in delisting work, and it is also the key to whether the normalization mechanism of delisting can be consolidated. The new delisting rules emphasize that improving the investor compensation and relief mechanism in the process of delisting will "stabilize the exit" while "withdrawing from the delisting". The Investor Service Center recently stated that the Investor Service Center will guide and support investors to actively exercise their rights if the delisted company and its controlling shareholders, actual controllers, directors and senior management have caused damage to investors due to violations of laws and regulations. The Investor Service Center will also help improve the three-dimensional accountability system for administrative, criminal and civil compensation, increase the cost of illegal activities in the capital market, and more vigorously protect the legitimate rights and interests of small and medium-sized investors.
Source of this article: China Securities Journal
Reporter: Zan Xiuli
WeChat editor: Liu Sile
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