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Source: Securities Times official microblog

As the share price of *ST Shentian hit the limit down again, the first market value delisting of an A-share company may have been locked in advance, thus creating new history.

An expert told a Securities Times reporter that market capitalization delisting is an indispensable part of the delisting system. Using market capitalization, an indicator determined by the market, as a condition for delisting will guide market funds to reduce the tendency to flow to companies with extremely low market capitalization, and urge low-market-cap companies to increase their market value by improving performance, improving governance, and strengthening communication with the capital market. This will help accelerate the formation of a high-quality development ecosystem for my country's capital market.

The first A-share listed company delisting due to market value may be born

On July 22, the stock price of *ST Shentian (000023.SZ) hit the limit down again, closing at 1.90 yuan. According to this stock price and the company's total share capital, the company's latest total market value is only 264 million yuan. It is worth noting that this is the 18th consecutive trading day that the company's stock closing market value is less than 300 million yuan.

According to the reporter's calculations, even if the company's closing price hits the daily limit for two consecutive trading days, its stock market value will still be less than 300 million yuan. In this way, the company's stock closing market value will be less than 300 million yuan for 20 consecutive trading days, thus triggering the market value delisting regulations.

It is worth noting that if *ST Shentian is delisted for this reason, it will become the first case of an A-share company being delisted due to market value in history.

According to the regulations that are still in effect, if the closing market value of a company's shares on the Shenzhen Stock Exchange is less than RMB 300 million for 20 consecutive trading days, the Shenzhen Stock Exchange will terminate its stock listing. According to the Shenzhen Stock Exchange's previously released "Shenzhen Stock Exchange Stock Listing Rules (Revised in 2024)", if an A-share company's "closing total market value of its shares on the Exchange is less than RMB 500 million for 20 consecutive trading days", it will be delisted. The revision of the market value delisting situation will start from October 30, 2024, which means that the probability of listed companies reaching market value delisting in the future will be higher.

According to the information, *ST Shentian Company is the full name of Shenzhen Tiandi (Group) Co., Ltd. It is a listed company with commercial concrete as its main business and real estate as its pillar industry. Its main industries include the production and sales of commercial concrete, real estate development and property management. The company's concrete business is concentrated in Shenzhen and Zhuzhou; real estate development is mainly in Shenzhen, Xi'an and Lianyungang; property management is mainly in Shenzhen. The company stated in its 2023 annual report that the company's concrete business was affected by unfavorable factors such as insufficient market demand and increased capital pressure in the industry, resulting in an increase in the unit operating cost of concrete and increasing difficulties in the operation of the company.

Judging from the financial data disclosed by *ST Shentian, the company's operating income has shrunk significantly in recent years, from 1.783 billion yuan in 2020 to 178 million yuan in 2023, and it has been in the red for many consecutive years.

*ST Shentian's recently released 2024 semi-annual performance forecast shows that the company expects the net profit attributable to shareholders of the listed company in the first half of 2024 to be a loss of 80 million to 100 million yuan, a decrease of 59.69% to 99.62% compared with the same period last year.

The number of companies facing the risk of delisting by market value is increasing

Before *ST Shentian, Jianche B (200054.SZ) had triggered the market value delisting regulations because its stock closing market value on the Shenzhen Stock Exchange was less than 300 million yuan for 20 consecutive trading days, becoming the first B share in history to trigger the market value delisting regulations. Jianche B has received a prior notice of termination of its stock listing from the Shenzhen Stock Exchange.

In addition, in addition to the above-mentioned companies, the market value of some listed companies once fell below 300 million yuan and also faced the risk of delisting due to market value.

For example, *ST Meixun recently issued a risk warning announcement that the company's stock may be delisted due to its market value being less than 300 million yuan, warning of the risk of delisting due to market value. Although the company's market value has recently returned to more than 300 million yuan, it is not far from 300 million yuan, and the latest market value is only 311 million yuan.

Ning Communication B also recently issued an announcement stating that the company's stock closing market value on July 17, 2024 was RMB 287 million, falling below RMB 300 million for the first time.

Overall, the delisting of companies due to market value in the mainland securities market began to occur for the first time this year and has been on the rise.

Yu Yang, deputy director of the Institute of Financial Development and State-owned Assets and State-owned Enterprises of the China (Shenzhen) Institute for Comprehensive Development and registered international investment analyst, pointed out in an interview with a Securities Times reporter that, first of all, this represents that the delisting system of my country's capital market is moving towards perfection. "More listings and fewer delistings" has always been a significant phenomenon in my country's capital market. A large number of zombie listed companies have squeezed market resources, and at the same time caused the prevalence of "shell speculation". Shell companies were put on the market and sold openly, making the secondary market valuation system unbalanced. Since the Shanghai and Shenzhen Stock Exchanges issued new delisting rules at the end of 2020, they have introduced market value delisting rules to promote my country's capital market to align with international standards in terms of delisting rules.

Secondly, Yu Yang believes that this represents the phased success of the regulatory authorities in curbing the "shell speculation" behavior. The main reason why shell companies are hunted by hot money is the expectation of restructuring. On the one hand, the regulatory authorities have dredged the listing path through the issuance registration system reform and reduced the demand for shell resources in the primary market. On the other hand, they have maintained high-pressure supervision on insider information trading, curbed the frequent speculation of hot money on shell companies, reduced the speculative demand of market funds for shell companies, and ultimately reduced the total demand for shell resources.

Finally, Yu Yang believes that this is also a sign that A-share investors are gradually maturing. Before 2022, even the market value of main board listed companies with continuous losses and negative net assets can be maintained above 800 million before delisting. If the market value is less than 300 million, there must be funds involved to gamble on the asset restructuring of listed companies. The existence of listed companies with a market value of less than 300 million yuan in the market just shows that today's investors are more rational and mature, and actively reduce the behavior of speculating on small and junk stocks.

Chen Jianhua, a strategic analyst at Yintai Securities, said in an interview with a Securities Times reporter that the current domestic capital market has formed a "1+N" policy system, with the main line of strengthening supervision, preventing risks, and promoting high-quality development of the capital market. A series of supporting policy documents and institutional rules have been formulated and issued, involving the entire chain of issuance, listing, and delisting. Strict delisting system is an important manifestation of strong supervision of the capital market. On April 12, 2024, the China Securities Regulatory Commission issued the "Opinions on Strict Implementation of the Delisting System". On April 30, the Shanghai and Shenzhen Stock Exchanges officially issued the revised "Stock Listing Rules". With the implementation of the new delisting rules, the increase in the number of delistings in the A-share market is within expectations.

Experts: Delisting based on market value is an indispensable part of the delisting system

Since the beginning of this year, the delisting efforts of the mainland securities market have been further strengthened.

According to Wind data, if calculated based on the delisting date, nearly 30 listed companies have been delisted by exchanges and have been delisted from the A-share market since the beginning of this year. Among them, the most common type of forced delisting is trading-related. Among the types of forced delistings due to trading, the most common type is par value delisting. With the recent emergence of companies delisted by market value, the practice of forced delisting due to trading will be further enriched.

According to statistics from reporters, if the number of companies that have been delisted this year, companies that have received prior notice of delisting from the exchange, companies that have received delisting decisions but have not yet been delisted, and companies that have locked in the par value delisting conditions in advance are combined, the number of companies delisted this year is expected to exceed 40.

In an interview with a reporter from the Securities Times, Yu Yang pointed out that establishing an effective delisting system is an important part of deepening capital market reform. Together with the issuance registration system, it has built an operating mechanism of advancement and retreat, and the survival of the fittest, and plays an important role in improving the overall quality of my country's listed companies. Market value delisting is an indispensable part of the delisting system. Using market value, an indicator determined by the market, as a condition for delisting, guides market funds to reduce the tendency to flow to companies with extremely low market value, and urges low-market value companies to increase their market value by improving performance, improving governance, and strengthening communication with the capital market, which is conducive to accelerating the formation of a high-quality development ecosystem for my country's capital market.

Chen Jianhua emphasized in an interview that the delisting system is a basic system of the capital market. Strict delisting standards are conducive to achieving an orderly entry and exit and timely clearing pattern, further enhancing the market's function of optimizing resource allocation and promoting high-quality development of the capital market. Market value delisting is a mandatory delisting for trading, and is an important aspect of the new round of delisting system reform. According to the revised rules of the Shanghai and Shenzhen Stock Exchanges, the market value delisting standard for A-shares (including A+B shares) on the main board will be increased from 300 million yuan to 500 million yuan starting from October 30. The transition period from the end of April to the end of October is the market value delisting standard, and the market value delisting standard for B-shares, GEM and Sci-Tech Innovation Board companies remains unchanged at 300 million yuan. Market value delisting further improves the delisting standards and further reflects the market's survival of the fittest mechanism. Compared with other types of delisting, it will prompt rising companies to continuously enhance their competitiveness, expand market scale and profitability, and help improve the overall quality of listed companies and investment value.

Editor: Chen Lixiang

Proofreading: Yang Lilin