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The delisting wave in July is still continuing, and "self-rescue" has become the key word for high-risk delisting stocks in the A-share market recently.

Faced with the urgent situation of delisting at par value, most companies with share prices below 1 yuan and some companies with share prices below 2 yuan have resorted to measures such as major shareholder repurchase and increase of holdings, bankruptcy reorganization, asset restructuring, and introduction of investment to protect the market.

The "shell protection battle" of listed companies also showed diverse results. The share prices of some companies stood above 1 yuan and temporarily escaped danger, while some companies still found it difficult to reverse the downward trend after "fancy" moves, and eventually ended up delisting.

So far this year, 30 A-share companies have been delisted, among which 15 companies including *ST Baoli, *ST Gaosheng, ST Zhongnan, and *ST Yilian were delisted because their stock prices were lower than their face value. ST Dima was also scheduled to be delisted on August 7 because its stock price was lower than its face value.

According to statistics from the Securities Times, as of the close of July 31, there were 21 A-share stocks with share prices below 1 yuan. Among them, 19 stocks have been suspended, and only ST Xudian and *ST Weichuan are still in normal trading. However, these two stocks have also hit the limit down for 16 and 17 consecutive trading days respectively, and are on the verge of delisting.

Many industry insiders analyzed to the Securities Times reporter that delisting at par value is itself a market-based delisting mechanism, and listed companies need to "save themselves" as early as possible. There will not be much room for maneuver after the delisting red line is triggered.

Currently, the vast majority of companies delisted at par value are shell companies that have lost their ability to continue operating and have been in the market for a long time. The key to whether a listed company can successfully maintain its shell status still lies in whether it has sustainable operating capabilities.

It is also worth noting that the par value delisting mechanism has also "inadvertently harmed" a small number of listed companies with good operating quality. Most of these companies are low-priced stocks due to a significant expansion of their share capital.

Senior investment bankers pointed out that they hope the par value delisting mechanism can be improved. For companies that still have the ability to continue operating, after they meet the par value delisting conditions, they may be given a period to rectify the situation, and then delist the company if the rectification is ineffective. For low-priced stocks that have previously expanded their capital substantially, they should be allowed to choose to save themselves by reducing their shares.

Throw out a "combination punch" to protect the market

Faced with the pressure of "delisting at 1 yuan", most low-priced stocks took action in advance. A large number of companies launched repurchases, followed by increasing holdings. In addition, there are also companies that launched a combination of "repurchase + increase holdings".

According to statistics from the Securities Times reporter, as of the close of July 31, there were 198 companies with A-share prices below 2 yuan, of which 58 companies launched repurchase plans and 49 companies announced increases in holdings.

Take Shanzi Hi-Tech, the most typical company that launched a "combination punch" recently, as an example. When the closing price fell below 1 yuan, Shanzi Hi-Tech tried to raise the stock price through large-scale repurchases and increased holdings by senior executives:

• First, the listed company announces that it intends to use its own funds to repurchase shares, with the total amount of repurchase funds not less than 600 million yuan and not more than 1 billion yuan, and the repurchase price not exceeding 1.6 yuan per share;

• The second is that the actual controller repurchases shares. Ye Ji, the chairman and president of the company, plans to increase his holdings of 10 million shares of the company through the secondary market with his own or self-raised funds;

• Third, Ye Ji apologized, reviewed the situation, reflected, and saved himself by issuing a "Shareholder Letter", and stated that he would not receive any salary until the company's stock price rose back to 1.6 yuan per share. All these methods sent positive signals to the capital market.

The repurchase, increase in holdings and the chairman's announcement of a salary suspension to save the market, this "combination punch" has an immediate effect. Currently, Shanzi Hi-Tech's stock price has been significantly boosted, with three consecutive gains and a cumulative increase of 34.88% in three days.

With the risk of delisting at par value approaching, Yatai Group has also put forward multiple plans to save its stock price.

Earlier on July 1, Yatai Group announced that Changchun State-owned Assets Supervision and Administration Commission designated Changfa Group as the main body, intending to increase its holdings of the company's shares by no less than 150 million yuan and no more than 300 million yuan, and the purchase price will not exceed 1.62 yuan per share. The company announced on the same day that shareholder Jinta Investment promised not to reduce its holdings of the company's shares in any way within 12 months from July 1, 2024.

Not long ago, Yatai Group also launched a repurchase plan, intending to repurchase the company's shares for 30 million to 50 million yuan.

In addition, HNA Holdings, Yicheng New Energy, Palm Holdings, Jishi Media, Zhaoxin Holdings and Royal Court International have all adopted self-rescue measures such as increasing holdings, repurchases or "two-pronged" measures.

After Huawen Group reached the risk of delisting at par value, Hainan Lianhan took a stake in it. Hainan Lianhan is backed by Hainan State-owned Assets. From June 4 to June 6 this year, Hainan Lianhan bought a total of 99.8701 million shares of Huawen Group, accounting for 5.0004% of the total share capital of Huawen Group, with a purchase amount of RMB 78.5086 million, boosting market confidence. On July 31, it closed up 9.65% at 1.25 yuan.

Many ST companies have also launched repurchase and share purchase plans in advance.

Since mid-to-late May, ST Ruide has announced several repurchase and share purchase plans. On May 22, the company's chairman and general manager Jiang Yang took the lead in increasing his holdings by 158,900 shares. Less than half a month later, ST Ruide announced that it would use its own funds of 50 million to 100 million yuan to repurchase the company's shares. On July 24, ST Ruide repurchased about 3.83 million shares of the company for the first time, and the total amount paid was about 5 million yuan.

Suning.com, which was delisted, also insisted on a "two-pronged approach" of repurchase and increase in holdings. On June 25, ST Suning announced plans to repurchase the company's shares with funds of no less than 80 million yuan and no more than 100 million yuan. Previously, the company also disclosed the management's shareholding increase plan. On July 29, ST Suning announced that some senior management and core business backbones had accumulated 2.88 million shares of the company's shares, with a total increase of 3.5152 million yuan.

Restructuring and reorganization have different effects on "self-rescue"

In addition to paying out real money, some companies have also tried to carry out bankruptcy reorganization or asset restructuring, divesting "burdensome assets" that are no longer profitable in order to improve the company's operating conditions and get rid of the risk of delisting.

On July 1, Jishi Media announced that it had reached an important agreement with its controlling shareholder, Jilin Radio and Television Station, to inject IPTV business into the listed company and realize asset swap. Jishi Media plans to sell its 100% equity in Sanya Yuecheng Investment Co., Ltd. and simultaneously acquire IPTV-related assets under Jilin Radio and Television Station. As of July 31, Jishi Media's stock price had risen by more than 20% to close at 1.10 yuan.

Dongfang Group started pre-reorganization, trying to divest inefficient assets such as the real estate sector. Dongfang Group's share price fell below 1 yuan on June 24, mainly because of restrictions on large withdrawals of its 1.64 billion yuan deposits. After that, the share price once hit the par value delisting red line.

On the evening of July 15, Dongfang Group issued the "Notice on the Court's Decision to Initiate Pre-Reorganization of the Company", announcing that the company would enter the pre-reorganization procedure. The next day, Dongfang Group's stock price soared 10.53%, returning to above 1 yuan after 16 trading days. As of the close of July 31, Dongfang Group closed at 1.07 yuan, temporarily out of the risk of delisting at par value.

However, bankruptcy reorganization is not an absolute "lifeline" to maintain the listing status. For example, ST Dima launched a bankruptcy reorganization plan when its stock price was on the verge of falling below 1 yuan, but it still failed to prevent its delisting.

On May 7, ST Dima's stock price hit the daily limit of 0.90 yuan per share. On the same day, the company received a notice that its controlling shareholder had signed a "Strategic Investment Framework Agreement" with Chongqing Jiangnan Urban Construction Development (Group) Co., Ltd., intending to resolve the debt crisis through judicial reorganization.

In addition, ST Dima also launched a plan to increase its holdings. The company announced on May 14 that, given that the company's current stock closing price is less than 1 yuan, the controlling shareholder or its concerted action person plans to increase its holdings by between 30 million yuan and 50 million yuan within 6 months from May 15. However, multiple self-rescue plans have not reversed the company's delisting situation, and ST Dima's stock has been suspended since the opening of the market on June 24.

*ST Hongtao, which was on the verge of delisting, still failed to reverse the outcome of delisting after applying for judicial reorganization. Since the beginning of this year, the share price of *ST Hongtao has fallen below 1 yuan many times. At that time, *ST Hongtao hoped to actively introduce external industrial investors through judicial reorganization and increase the intensity of industrial coordination and transformation. However, due to multiple factors such as the industry environment, *ST Hongtao has been suspended since July 1, and its announcement on July 30 showed that the court ruled not to accept *ST Hongtao's reorganization application.

"Delisting at par value is itself a market-based delisting mechanism. If the stock price is lower than the par value for 20 consecutive trading days, there is still one month to save the company after it falls below the par value for the first time. For example, if the company's stock price has fallen below 2 yuan, it should take action to save the stock price. The self-rescue plan can be repurchase, major shareholders increasing their holdings, and communicating with investors to demonstrate the company's investment value. It can also be a reorganization, but temporary reorganization and restructuring is still difficult." Wang Jiyue, a senior investment banker, told a Securities Times reporter.

Sustainable operation capability is the core

Although many listed companies whose share prices are close to the 1 yuan delisting line are actively trying to "save themselves", which has boosted share prices to a certain extent in the short term, the long-term effects remain to be verified. In the future, the market will still be more focused on the intrinsic value and sustainable operating capabilities of listed companies.

Kuang Yuqing, founder of Lens Consulting, analyzed to reporters that the vast majority of companies that have delisted at par value are shell companies that have lost their ability to continue operating. Whether they can successfully maintain their listing depends on whether they have sustainable operating capabilities at the main business level.

"Under the current diversified shell-keeping measures, how can investors determine whether companies on the verge of delisting still have long-term operating capabilities? The key lies in the direction of their business expansion and capital operations. If a company expands channels, supply chains, technologies or products based on its original business, it is relatively reliable, but we must remain vigilant about cross-border capital operation projects," said Kuang Yuqing.

However, for some companies with the ability to continue operating, the delisting standards have been tightened again since April this year. Under the dual pressure of "delisting at face value" and "delisting at market value", such companies also face the risk of delisting, such as Baosteel Co., Ltd., HNA Holdings, Shandong Steel, Liaogang Co., Ltd., HNA Holdings and other companies in traditional industries.

Luo Chunlei, an expert at Kant Think Tank and a lawyer at Shanghai Guangming Law Firm, analyzed that when traditional industry listed companies face unfavorable factors such as intensified industry competition and declining market demand, their performance and stock prices may decline, thus reaching the par value delisting red line. In addition, fluctuations in market sentiment and irrational behavior of investors may also cause abnormal fluctuations in the stock prices of such companies, increasing the risk of delisting.

"A few companies have not indeed lost their ability to continue operating, but because of their previous excessive capital expansion, the market value of each share has become close to the par value or even eventually fell below the par value. However, this is not a problem that has only arisen this year. Baosteel shares have been on the edge of par value for many years," Wang Jiyue pointed out.

Baosteel Group is one of the largest steel listed companies in western my country, but its stock price has long hovered around 1 yuan. As of the close of July 31, Baosteel Group reported 1.46 yuan per share, up 1.39%, with a total market value of 66.291 billion yuan.

Lawyer Luo Chunlei said that these companies with operational capabilities can deal with delisting risks by strengthening internal management, expanding new business areas, enhancing investor communication, and paying attention to market trends.

Wang Jiyue suggested that the par value delisting mechanism should be improved. For example, a rectification period could be set. For companies that still have the ability to continue operating, they should not be delisted directly after meeting the par value delisting conditions. Instead, they should be given a rectification period. If the rectification is ineffective, they can be delisted. For companies that still have the ability to continue operating and have low-priced stocks due to previous substantial expansion of share capital, they should be allowed to choose stock reduction as a self-rescue plan.

Editor: Chen Lixiang

Proofreading: Zhu Tianting