The delisted stocks set a record of a one-day decline in the history of A-shares, and the necessity of reorganization was questioned under the heating up

National Business Daily

2024-06-05 23:57Published on the official account of Sichuan Daily Economic News

Reporter: Wang Lin Editor: Zhang Haini

The largest one-day decline in the history of A-shares: 96.44%! On June 5, the shares of the delisted Yuancheng, the delisted Carbon Yuan, and the delisted Tongda that entered the delisting period fell by 96.44%, 83.33% and 80.65% respectively. Such a value breakdown may also shock listed companies on the verge of delisting.

In the context of the normalization of delisting, some listed companies facing difficulties also regard bankruptcy reorganization as an important way to avoid delisting, and the number of related cases has gradually increased in recent years. The reporter combed and found that as of June 4, 27 listed companies are currently promoting (pre)reorganization and issued relevant announcements, of which 16 are (proposed) applied for or were applied for this year.

Compared with the reorganization model, pre-reorganization has gradually been favored by listed companies in recent years. "With the court's stricter review of the reorganization of listed companies, in order to make the court think that the future reorganization is more feasible, the enterprise has gone through a pre-reorganization procedure in front of it, and the basic work of some reorganization procedures has been pre-empted." Wang Zhaotong, a lawyer at Beijing Weiheng Law Firm, told the "Daily Economic News" reporter.

Yin Zhongyu, assistant to the president of the Federal Reserve Securities, mentioned that while the reorganization of listed companies is heating up, its necessity has also been questioned.

In addition, the 15 listed companies that completed last year's restructuring now have different fates, and there is still uncertainty about the ability of many companies to continue to operate. "The completion of the reorganization plan does not mean that the reorganization has been successful." Wang Zhaotong said.

Image source: Visual China-VCG41N1337453747

The pre-restructuring has become mainstream, and 16 companies have participated in the year

The reporter found that as of June 4, 27 listed companies in the A-share market were promoting (pre-)reorganization and issued relevant announcements, of which *ST Bugao, *ST Jinke and ST Dima 3 companies applied for or were applied for reorganization, and the remaining 24 companies applied for or were applied for pre-reorganization.

From the perspective of time, 16 of the above 27 listed companies that promote (pre-)reorganization are applying or being applied to the court this year, the latest case is *ST Jiayu, which announced on June 3 that it was applied for reorganization and pre-reorganization by creditors.

From the perspective of the progress of (pre-)reorganization, among the 24 pre-re-organized listed companies, 16 have obtained the consent of the court to initiate the reorganization and have entered the pre-reorganization procedure; Among the three reorganized listed companies, in addition to ST Dima, *ST Bugao and *ST Jinke have also been accepted by the court.

What is the difference between a reorganization and a pre-reform?

According to an article in the People's Court Daily reprinted by China Court Network on December 7, 2023, pre-reorganization refers to a rescue mechanism in which the debtor and the creditor formulate a reorganization plan through out-of-court negotiation before applying for reorganization, and after obtaining the consent of the majority of creditors, the reorganization plan is made effective by binding all creditors with the help of the reorganization procedure, so as to realize the debtor's recovery as soon as possible.

An article in the third issue of Application of Law in 2022 also wrote that the main difference between pre-reorganization and bankruptcy reorganization is the difference in the time and depth of judicial intervention. However, in terms of bankruptcy reorganization procedures in a broad sense, pre-reorganization also falls within the scope of bankruptcy reorganization procedures.

It is worth mentioning that in the past, A-share listed companies used more reorganization models, and in recent years, the pre-reorganization model has become more popular. For example, among the 16 listed companies that applied for or were applied for (pre-)reorganization this year, except for ST Dima's application for reorganization, the rest chose pre-reorganization.

Lawyer Wang Zhaotong told the reporter of "Daily Economic News" that when there was no pre-reorganization before, the court may find that the plan submitted for approval by the enterprise is relatively rough, but at the same time, because it cannot casually declare bankruptcy on a listed company, it leads to a dilemma after entering the reorganization procedure. Although some reorganization plans may have some problems of certainty and feasibility, the court finally approved them, but this may also lead to the second bankruptcy of the enterprise, or the formation of an idling of the reorganization procedure.

"With the court's stricter review of the reorganization of listed companies, in order to make the court think that the future reorganization is more feasible, the enterprise has gone through a pre-reorganization procedure in front of it, and the basic work of some reorganization procedures has been pre-empted." Wang Zhaotong said.

Last year, 15 companies completed the implementation of the reorganization, and the fate of the company was very different

What is the effect of the reorganization of listed companies?

Taking last year's 15 companies that completed the implementation of the reorganization as an example, the "Daily Economic News" reporter combed and found that although the 15 companies subsequently applied to the exchange to revoke the delisting risk warning, only 5 companies were withdrawn from the delisting risk warning, including ST Quanzhu, ST Intercontinental and ST Xigang 3 companies in the withdrawal of the delisting risk warning, but also due to the company's ability to continue operating after the reorganization There is uncertainty or need to be further recovered. Other risk warnings were implemented.

The delisted mall, which completed the reorganization plan at the end of last year, was also revoked in January this year due to the delisting risk alert implemented due to the reorganization, but because the delisted mall still touched the delisting risk alert and other risk alerts, the company's shares were continued to be delisted risk alerts, and other risk alerts were superimposed.

The reason for the delisting is that "the company's audited net profit in 2023 is negative and the operating income is less than 100 million yuan, and the 2023 financial and accounting report is issued an audit report that cannot express an opinion".

Among the remaining 9 listed companies that have not been revoked the delisting risk warning, the earliest *ST Rongtai disclosed on March 19 this year that it had applied to the exchange to cancel the delisting risk warning, but more than two months have passed, and there is still no final word.

Judging from the situation in the first quarter of this year, the effect of restructuring on the recovery of profitability of all enterprises is not consistent.

Among the 15 listed companies that have completed the reorganization plan, in addition to ST Intercontinental, Xinhualian, and Zhongjie Resources, which have been withdrawn from the delisting risk warning, *ST Doushen and *ST Jinyi, which have not yet been withdrawn from the delisting risk warning, and the delisted mall, the other 9 companies still lost net profit attributable to the parent after deducting non-profits in the first quarter of this year.

In addition to the alarm brought by the financial delisting, a number of other factors also affect the fate of these restructured listed companies.

The reporter noticed that the stock prices of some listed companies are still hovering at a low level, and they have not yet completely gotten rid of the risk threat of "delisting at face value". For example, ST Quanzhu, which has been withdrawn from the delisting risk warning, closed at 1.67 yuan per share on June 5, and some investors recently asked the company whether it was worried about suffering a "face value delisting" on the SSE e-interaction.

In addition, there are also individual listed companies that step on the thunder of intermediaries at critical moments. For example, last month, the Jiangsu Securities Regulatory Bureau suspended the securities service business for six months by the Jiangsu Securities Regulatory Bureau for the fraud case involving Jin Tongling. Recently, some investors asked on the SSE e-interaction: Will the company's "star and hat off" be affected by Dahua's fines? *ST Rongtai responded: The company's reply to the "Annual Report Inquiry Letter" is being actively promoted, and the company has not received any relevant notice from Dahua that there are obstacles to the company's "Annual Report Inquiry Letter".

The necessity of the reorganization of listed companies needs to be examined

It is worth mentioning that the reorganization of A-share listed companies has been heating up in recent years.

According to the 2023 A-share M&A Market Summary and 2024 Outlook recently released by Reserve Bank Securities, a total of 27 listed companies in the A-share market will apply to the court for reorganization or be applied for reorganization in 2023 and issue relevant announcements, the highest number since the promulgation of the Enterprise Bankruptcy Law and the introduction of the bankruptcy reorganization system in mainland China in 2007.

There are also voices in the market questioning whether A-share listed companies are suspected of generalization and abuse of reorganization.

"On the whole, reorganization as a tool is not fully used by listed companies, and it is actually a problem of underuse rather than abuse." Wang Zhaotong said.

However, at the same time, from the perspective of the starting point and operation process of the reorganization of listed companies, there are places that have been questioned by the market, and the reorganization effect of listed companies is also uneven.

According to the above-mentioned report of the Federal Reserve Securities, the restructuring of the A-share market has brought about problems such as the imbalance of interests between new and old shareholders and creditors for the purpose of avoiding delisting.

There is also a background factor behind the rise in the restructuring of A-share listed companies, which is the continuous promotion of the normalization of delisting by the regulator in recent years.

In April this year, the State Council issued a new "National Nine Articles" for the capital market, which put forward the requirement of "increasing the intensity of delisting". Wu Qing, chairman of the China Securities Regulatory Commission, also mentioned in his speech at the 2024 "5.15 National Investor Protection Publicity Day" event that it is necessary to resolutely remove "zombie enterprises" and black sheep from the market.

So, how to view the value and necessity of the reorganization of listed companies? Especially for companies at risk of delisting.

Wang Zhaotong believes that to a certain extent, reorganization is the "regulator" of strict implementation of the delisting system, but it is true that some enterprises choose reorganization in order to avoid delisting.

"Restructuring is just a tool, it can play its role when the enterprise is still valuable, if the company's own fundamentals are not good, then no matter how good the tool is, it can't play a role, and you can't expect to restructure this tool too highly." Wang Zhaotong said that if you think that reorganization is a cure for all diseases, it can cover up various problems of enterprises, and can also allow enterprises to avoid delisting, then you will put the cart before the horse.

"The real restructuring should be based on the restructuring of the company's continuing operating value, rather than the restructuring based on a shell resource." Wang Zhaotong added.

The reorganization of listed companies should be tightened?

While the (pre-)reorganization of listed companies is heating up, its mouth seems to be tightening.

The reporter found that since the beginning of this year, only the reorganization application of a listed company of *ST Jinke has been accepted by the court. According to the above-mentioned report of the Federal Reserve Securities, a total of 16 listed companies' reorganization applications were accepted by the court in 2023.

Among the listed companies that have not yet been accepted, the road to reorganization of some companies has also been quite long. For example, ST Kao has entered the pre-restructuring stage as early as April 2022, but the company has not yet entered the restructuring process, which has also caused some investors to anxiously inquire about the company's progress in the stock bar.

At the same time, in January this year, *ST Eddie was found by the court to lack the feasibility of reorganization and did not meet the conditions for acceptance of reorganization, and the court ruled not to accept the creditor's reorganization application against it; In April this year, the court also ruled that ST Tai'an would not accept the reorganization application against it. In addition to the rejection of the reorganization, there were also those who took the initiative to withdraw - before the court ruled to accept it, the creditor withdrew the reorganization application against *ST Meishang.

In the end, the three companies of *ST Aidi, *ST Tai'an and *ST Meishang failed to escape the fate of delisting and suffered "delisting at face value".

However, in Wang Zhaotong's view, it is not more difficult for listed companies to restructure the market at present, but more open. "The pre-restructuring gave you a long time to have relatively open, fair and impartial communication, which was originally done underwater, and now it has surfaced. For example, in the past, information that was not accepted by the court would not be made public, but now it will be transparent, and with more subjects participating, it will definitely be more difficult. Wang Zhaotong said.

Yin Zhongyu told the "Daily Economic News" reporter that the regulator has also strengthened the torture of the necessity of reorganization, "The first question to ask in this year's reorganization is what is the necessity of your reorganization?" Why Bankruptcy Reorganization? What is the value of your property? ”

"Whether a company still has the value of listing is better left to the market to judge, and we can be more open to the reorganization of listed companies, leaving this option to creditors and investors." Wang Zhaotong said.

National Business Daily

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