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Du Hengfeng, commentator of the Economic Daily

On the evening of August 6, Lingnan Shares issued an announcement stating that the "Lingnan convertible bonds" will expire on August 14. The company's current cash is insufficient to cover the redemption amount, there is a large funding gap, and there is no large amount of capital inflow expected in the next two weeks. There is a high probability that the convertible bonds will face redemption risks.

The convertible bond risk of Lingnan shares had already appeared as early as July last year. At that time, the credit rating of Lingnan convertible bonds was still A+, but it was downgraded several times until it was downgraded to CC in early August this year. In mid-May this year, the price of Lingnan convertible bonds was still around 100 yuan, but after the company received the annual report inquiry letter from the exchange on May 22, the price of convertible bonds began to decline all the way. The annual report inquiry letter mainly focuses on the company's 2023 financial report being issued with an unqualified opinion with a paragraph of significant uncertainty in going concern. The annual report shows that the overdue debts of Lingnan shares and its subsidiaries have reached 225 million yuan. As of the end of the first quarter of this year, its monetary funds balance was 247 million yuan, short-term loans were 2.24 billion yuan, and the balance of non-current liabilities due within one year was 1.662 billion yuan. Cash can hardly cover short-term liabilities. After the annual report inquiry letter was announced, the price of Lingnan convertible bonds fell all the way to 51.265 yuan on June 24. At the same time, the share price of Lingnan Shares also continued to fall, once falling below the face value of 1 yuan, almost triggering a delisting at face value.

The turning point came on the evening of June 24, when the company announced that it had received a notice from Huaying Investment, an affiliate of the controlling shareholder Huaying Industrial Investment, that Huaying Investment plans to increase its holdings of the company's convertible bonds or increase its holdings of the company's shares through centralized bidding, convertible bond conversion, block trading, etc. in the next six months, with the amount of increase not less than RMB 28 million. On June 26, six executives, including co-chairman and president Yin Hongwei, increased their holdings of a total of 717,300 shares of the company, corresponding to RMB 690,000.