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The delisting system is one of the basic systems for the healthy development of the capital market. In the past few years, A-share delisting has been mainly forced, and few companies have voluntarily applied for delisting. However, with the tightening of listing supervision, cases of voluntary delisting have begun to increase in recent years.

On the evening of August 2, *ST Yaxing announced that the company's controlling shareholder proposed to voluntarily withdraw the company's stock listing based on the current market environment and company situation.

According to incomplete statistics from a Securities Times reporter, in addition to *ST Yaxing, as of now, among the A-share listed companies, other companies that have voluntarily applied for delisting include *ST Erchong, *ST Hangtong, *ST Shangpu and Jingwei Textile Machinery.

King & Wood Mallesons Research Institute pointed out that voluntary delisting may provide companies with more space, time and other dimensions to survive in adversity, transform mechanisms, realize new development opportunities through restructuring, reform and other measures, and generate new momentum and vitality. Taking a step back may lead to a new life with a broader horizon.

Plan to actively apply for delisting

According to the announcement of *ST Yaxing, the company recently received a letter from the company's controlling shareholder Weichai (Yangzhou) Investment Co., Ltd. Based on the current market environment and the company's situation, it proposed that the company voluntarily withdraw the listing of the company's shares on the Shanghai Stock Exchange by way of a resolution of the shareholders' meeting.

The company promises to advance the communication, demonstration and work arrangements of the above-mentioned major matters as soon as possible. The company's shares will be suspended from the opening of the market on August 5, 2024 (Monday). It is expected that the relevant announcement will be disclosed and the stock will resume trading after the suspension period does not exceed 5 trading days.

*ST Yaxing is a listed company under Weichai Group that is mainly engaged in passenger vehicle business. It currently has two brands, "Yaxing" and "Yangzi", with more than 20 series and more than 100 varieties, covering large, medium, light, high, medium and ordinary passenger vehicles. The actual controller of the company is the State-owned Assets Supervision and Administration Commission of Shandong Province.

The company's performance has been under pressure in recent years. In 2020, the company's revenue fell by 31.68% to 1.85 billion yuan, and its net profit attributable to the parent company was a loss of 158 million yuan; in 2021, the company's revenue fell by another 48.64% to 950 million yuan, and its net profit attributable to the parent company turned from loss to profit; in 2022, the company's revenue increased by 55.48% to 1.477 billion yuan, but its net profit attributable to the parent company was a loss of 196 million yuan; in 2023, the company's revenue fell by another 18.11% to 1.21 billion yuan, and its net profit attributable to the parent company was a loss of 337 million yuan.

The company's previously released semi-annual report forecast that the net profit in the first half of the year is expected to be about -27 million yuan to -18 million yuan. The company said that benefiting from the development of overseas markets in the early stage, the company's export business will increase significantly in 2024, and sales revenue in the first half of the year is expected to be 1 billion yuan to 1.3 billion yuan, a year-on-year increase of 161%-239%. The substantial increase in sales revenue has led to better operating performance for the company. The net profit attributable to the parent company in the first half of 2024 is expected to be -18 million yuan to -27 million yuan, and the amount of loss is lower than the same period last year. Non-recurring gains and losses are mainly due to the company's litigation and a batch of goods sent overseas that have not yet been delivered to customers. The company has estimated the relevant losses based on the current situation.

Voluntary delisting is generally when a listed company, based on comprehensive considerations such as achieving development strategies and maintaining reasonable valuations, believes that it is no longer necessary to maintain its listing status, or that continuing to maintain its listing status is no longer beneficial to the company's development, and thus proactively applies to the stock exchange to terminate its stock listing.

King & Wood Mallesons Research Institute believes that the reasons for the difficulties of listed companies are different, and they are mainly manifested in the following categories: backward technology and products, serious decline in market share, continuous operating losses, major governance defects, etc. Active delisting can prevent small and medium shareholders from fleeing in large numbers in the delisting consolidation period or thereafter, which would have a huge negative impact on the company's stock price; at the same time, it can buy more time and space for listed companies and their controlling shareholders, actual controllers and other entities to deal with and resolve public opinion risks and investor relations issues caused by major adverse events.

In addition, the relevant parties provide cash options during the voluntary delisting process. For small and medium-sized shareholders, they have the right to choose to sell shares to specific objects, which is a cash exit and protection mechanism. The providers of cash options need to bear the costs, but it is helpful to alleviate the financial pressure of listed companies.

There are still few cases of voluntary delisting

In January this year, Guo Ruiming, director of the Listed Company Supervision Department of the China Securities Regulatory Commission, said at a press conference that the China Securities Regulatory Commission has noticed the view in the market that "the delisting rate of A-shares is not high". The core of the delisting reform is to insist on "delisting as many companies as possible", and to delist them steadily while allowing them to do so. It is not the case that the more delistings, the better.

Guo Ruiming further stated that the delisting in overseas markets represented by the United States is mainly privatization and merger by other listed companies, and is mainly voluntary. In some markets, voluntary delisting accounts for more than 90% of the total delisting, and the proportion of real forced delisting is not high. The delisting of these companies is a market-oriented choice made voluntarily based on their own corporate strategic considerations. There are many companies that are forced to delist from the A-share market, but the cases of restructuring delisting and voluntary delisting are much less than those in overseas markets.

Regarding the next regulatory actions, Guo Ruiming clearly stated that the CSRC will continue to consolidate and deepen the normalized delisting mechanism in accordance with the requirements of the reform, continue to open up diversified exit channels, support the effective integration of resources through mergers and acquisitions, and promote the improvement of the bankruptcy reorganization system.

In recent years, the number of cases of A-share companies actively applying for delisting has been increasing, but compared with companies that were forced to delist, the proportion is still relatively low. According to incomplete statistics from Securities Times reporters, in addition to *ST Yaxing, as of now, among A-share listed companies, *ST Erchong, *ST Hangtong, *ST Shangpu and Jingwei Textile Machinery have actively applied for delisting. Among them, *ST Erchong, *ST Hangtong and *ST Shangpu all chose to delist voluntarily due to operating difficulties and other problems, while Jingwei Textile Machinery voluntarily applied for delisting without triggering any delisting conditions financially, which is the first case in A-shares.

In addition to the above-mentioned companies' major shareholders actively applying for delisting, mergers and acquisitions between listed companies and delisting by tender offer are also active delisting methods. According to incomplete statistics from Securities Times reporters, since 2019, Little Swan A, Yingkou Port, Gezhouba, Shoushang Shares, ST Pingneng, and AVIC Electromechanical have withdrawn from the A-share market due to mergers and acquisitions.

Orient Securities pointed out that voluntary delisting gives companies a "second choice" after listing: especially for small-cap companies, the increased difficulty of refinancing and the decline in investment and trading activity in the secondary market make voluntary delisting one of the options that major shareholders can consider.

Orient Securities predicts that voluntary delisting will be the inevitable path for A-shares. The implementation of the registration system has made listing status no longer scarce, and voluntary delisting may become the inevitable path for the market to achieve a virtuous investment and financing cycle.

Source: Securities Times official microblog

Statement: All information content of Databao does not constitute investment advice. The stock market is risky and investment should be cautious.

Editor: He Yu

Proofreading: Liu Rongzhi

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