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Xiong Jinqiu (Senior Capital Market Researcher)

On August 3, *ST Asia Star disclosed that it had recently received a letter from its controlling shareholder Weichai Investment, which proposed that the company voluntarily withdraw its shares from the Shanghai Stock Exchange through a resolution of the shareholders' meeting, and the company will suspend trading on August 5. The author believes that the voluntary delisting of listed companies has positive significance.

The audited net assets of Asiastar Bus in 2023 were negative. According to the Shanghai Stock Exchange's "Stock Listing Rules", the company's stock was issued a delisting risk warning (*ST). In the first quarter of this year, the company's loss per share was 0.02 yuan, and its net assets further decreased.

In April this year, the China Securities Regulatory Commission's "Opinions on Strictly Implementing the Delisting System" proposed to open up diversified delisting channels and support voluntary delisting in a market-oriented manner. In order to strengthen the protection of the interests of small and medium-sized investors in voluntary delisting, the "Opinions" also proposed that listed companies that voluntarily delist through tender offers, shareholder meeting resolutions, etc. should provide special protection such as cash options for dissenting shareholders. This year, the Shanghai Stock Exchange's "Stock Listing Rules" stipulate that if a listed company applies for voluntary delisting, the documents submitted should include "special instructions on providing cash options and other protection measures for dissenting shareholders."

According to the rules, voluntary delisting must be approved by the shareholders' meeting. If cash options are only provided to dissenting shareholders, but not to small and medium-sized shareholders who vote in favor of the voluntary delisting proposal, this may lead to reverse incentives. Many investors may tend to vote against the proposal to seek cash options. After all, cash options may be more attractive than holding shares, making it difficult for voluntary delisting proposals to pass. Therefore, there are some controversies in providing cash options to dissenting shareholders during voluntary delisting.

In reality, listed companies generally provide cash options to all small and medium shareholders, and cash options have a certain premium over the market price, which makes it easier to obtain the approval votes of small and medium shareholders (the author believes that this can be elevated to an institutional rule); for companies that intend to voluntarily delist, their own operations may encounter some problems, and the providers of cash options are often the controlling shareholders of listed companies or their affiliates. Listed companies that voluntarily delist are also mainly state-controlled listed companies, which reflects the social responsibility of state-owned enterprises and strives to avoid a lose-lose situation.

Compared with passive forced delisting, voluntary delisting has more positive significance. Once the forced delisting announcement is released, the stock price often plummets, and small and medium-sized investors suffer heavy losses. The cash option price for voluntary delisting is generally not lower than the market price, and even if investors suffer losses, they can control them within a certain range. Voluntary delisting also has certain policy benefits in terms of relisting, and companies can apply for relisting at any time, while companies that are passively delisted need to meet certain time interval conditions. Voluntary delisting companies gain buffer time, which can be used to change development strategies, seek new development space, and even achieve retreat to advance.

At present, the pricing mechanism of cash options in voluntary delisting is still unclear, which has also triggered some market debates. For example, some investors use net assets as an important reference for cash option pricing, and believe that the price of cash options should not be lower than the company's net assets per share. However, net assets may sometimes be inflated, including accounts receivable, goodwill and other items may not be included, so net assets may only serve as an auxiliary reference for cash option pricing.

Market prices should be an important reference for the pricing of cash options. For an efficient market, all information in the market has been fully reflected in the stock price, and the market price has important reference value. Of course, in order to strengthen the protection of the interests of small and medium-sized investors, cash options can appropriately provide a certain premium. Based on this, the author suggests that it can be stipulated that the price of cash options for listed companies' voluntary delisting should not be lower than the arithmetic average of the daily weighted average price of the thirty trading days before the stock was suspended, and 115% of the closing price of the stock on the last day before the suspension, whichever is higher.

Of course, this also requires listed companies to disclose information in a comprehensive, accurate and timely manner. Only when the information is fully disclosed can the market price formed by this be of reference value and can be used as a reference for determining the price of cash options. Otherwise, other ways must be found, including seeking evaluation assistance from professional institutions.

In short, in the current market environment, it is not a bad thing for troubled listed companies to voluntarily delist. It not only frees up capacity for the market, but also avoids the adverse consequences of investors' shareholding value being almost reduced to zero during forced delisting. With the help of controlling shareholders and other parties, delisted companies can accumulate energy again and win development space for the future.

The opinions expressed in this column are solely those of the author.