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Author: Big Brother, Editor: Xiaoshimei

In 2011, 46-year-old Shijiazhuang tycoon Li Zhaoting acquired the listed company in the same city, Baoshi A, from state-owned assets and renamed it Dongxu Optoelectronics, becoming one of the representative events of state-owned enterprise withdrawal and private enterprise advancement in the capital market that year.

In the following years, Dongxu Optoelectronics' performance and stock price performance were booming. The company's market value once exceeded 100 billion yuan. Li Zhaoting also became the richest man in Shijiazhuang for a time, reaching the peak of his life.

At this time, Li Zhaoting might not have thought that the hundreds of billions of business empire he had worked so hard to build would be delisted eight years later.

【Double delisting, the fall of a giant】

The fate of Dongxu Optoelectronics' delisting had actually been foreshadowed for a long time.

On the evening of April 29, the day before the final closing date for the A-share annual report, Dongxu Optoelectronics issued a risk warning announcement that it would not be able to disclose its regular reports on schedule. The next day, the company's stock price fell to the limit and was suspended.

On the evening of July 5, the last day of the two-month suspension period, ST Xudian disclosed its latest financial report: in 2023, the company achieved revenue of 4.564 billion yuan, a year-on-year decrease of 22.55%, and a net profit loss of 1.604 billion yuan; in the first quarter of 2024, the company achieved revenue of 1.013 billion yuan, a year-on-year decrease of 11.19%, and a net profit loss of 297 million yuan, a decrease of 31.97%.

▲Source: Tonghuashun

The sluggish performance is actually reasonable. The previously released financial reports from 2019 to 2022 show that the company's revenue scale has been halved in recent years, and its net profit has been in the red for four consecutive years, with a total loss of nearly 10 billion. Since the new delisting rules have cancelled the delisting clause for continuous losses, the sluggish performance will not bring delisting risks.

The really serious issue is the company's financial doubts and irregularities.

As early as 2019, the high deposits and loans in the company's balance sheet had aroused market doubts. From 2021 to 2022, the company's financial reports were issued with reservations by the audit department for two consecutive years, and the market's doubts about the company's financial situation have further deepened.

The 2023 financial report released on the evening of July 5 was again issued with a qualified opinion by the audit department, and a negative audit report was issued on the effectiveness of the annual internal control. One of the reasons behind this may be that the controlling shareholder Dongxu Group occupied 9.595 billion yuan of the company's funds for non-operating purposes, which accounted for 45.64% of the company's audited net assets for the period.

Everything finally came to light. It turned out that the company's money was indeed occupied by the controlling shareholder.

In accordance with regulatory requirements, the company's shares have been subject to other risks since July 9, and all occupied funds must be returned within 6 months, otherwise the delisting mechanism will be triggered.

The market did not give Dongxu Optoelectronics any chance to correct its mistakes.

After the resumption of trading on July 9, the company's stock price continued to fall to the limit, with no signs of any funds to rescue the market. As of August 14, ST Xudian had fallen to the limit for 28 consecutive days, and its stock price had been below 1 yuan for 20 consecutive days, triggering the delisting clause of "the stock price is below the par value for 20 consecutive trading days."

B shares, which have extremely low liquidity and are easier to pull up, did not become a lifeline for Dongxu Optoelectronics.

As early as November 2022, Dongxu Optoelectronics' B shares had fallen below the 1 yuan mark, and have never returned to above 1 yuan in the nearly two years since then. As of August 14, ST Dongxu B had fallen to 0.16 Hong Kong dollars, equivalent to RMB 0.145, far lower than the A-share price.

On August 15, ST Xudian and ST Dongxu B were both suspended from trading, and the delisting at par value was finally settled. The giant with a market value of hundreds of billions in the past is also likely to become the first listed company to delist both its AB shares this year.

[From prosperity to decline, the end of vanity]

Like many listed companies that are now stuck in the quagmire of delisting, Dongxu Optoelectronics once had a very glorious experience.

Between 2011 and 2016, that is, the five years after the acquisition of Baoshi A, Dongxu Optoelectronics demonstrated super strong growth capabilities, with revenue increasing nearly 40 times, net profit increasing 10 times, and the maximum stock price increase exceeding 4 times.

If the time period is extended to the end of October 2008 to mid-September 2016, the maximum cumulative increase in Dongxu Optoelectronics' stock price exceeded 25 times (calculated based on the pre-adjusted price), and its market value exceeded 100 billion, making it a super bull stock that was very popular in the market at that time.

Dongxu Optoelectronics’ glorious past, to a certain extent, comes from the magical power of the capital market.

A joke that was circulated many years ago was: "One day in the future, you will be sitting in a new energy electric car, and the on-board screen will help you play music and navigate at the same time, and this new energy car uses a battery based on graphene technology." This simple scene includes three trendy concepts: new energy vehicles, OLED screens, and graphene, and Dongxu Optoelectronics is involved in all three concepts.

In 2013, Dongxu Optoelectronics began to develop flat panel display glass substrate production lines, and eventually became the world's fourth and China's largest glass substrate manufacturer. It once had the only complete set of liquid crystal glass substrate production processes and equipment manufacturing capabilities in the country.

In 2014, the company began to develop the graphene industry and launched the world's first graphene-based lithium-ion battery product - power bank, becoming one of the representative companies in the domestic graphene industrialization.

In 2017, Dongxu Optoelectronics acquired Shenlong Bus and officially entered the new energy vehicle industry.

At the peak of its development, Dongxu Optoelectronics was selected as one of "Forbes China's Most Promising Small and Medium Enterprises", ranking second on the list. Its multiple popular concepts also made it very popular in the A-share market, with the amount of financing from the stock issuance alone exceeding 20 billion.

However, the diversified layout did not bring sustained growth to the company. A large amount of money was invested in the industrialization of graphene, but it did not bring the expected economic benefits. The performance of new energy vehicles was also lackluster. The company's performance base is still in the early optoelectronic display industry.

In fact, the diversified layout in the field of high-tech industries requires not only extremely high capital investment, but also extremely high technical reserves. In order to gain an advantageous position in the fierce market competition, continuous high investment in research and development is indispensable.

From 2019 to 2023, the company's R&D expenses began to decline sharply, totaling just over 1 billion, while financial expenses were close to 5 billion, nearly five times the R&D expenses in the same period. This is an extremely rare phenomenon in the A-share market.

▲Source: Tonghuashun

When the once fast-growing tech giants become more and more flashy, perhaps their end is doomed.

[The former richest man, powerless to turn the tide]

In addition to Dongxu Optoelectronics, Li Zhaoting has a larger capital territory. After taking control of Dongxu Optoelectronics and tasting the sweetness of capital, Li Zhaoting launched a series of high-leverage capital operations.

In September 2015, Dongxu Group acquired Baoan Real Estate for RMB 2.364 billion, renamed it Dongxu Blue Sky, and proposed a RMB 9.5 billion fixed increase plan to move into the then-hot photovoltaic industry. A year later, it acquired 19.16% of Jialingjie’s shares for RMB 1.275 billion and began to expand into the traditional clothing industry.

At this point, Dongxu Group controlled three listed companies, Dongxu Optoelectronics, Dongxu Blue Sky and Jialingjie. The "Dongxu Group" became an important capital force in the A-share market. The asset scale of Dongxu Group grew from more than 1 billion yuan to more than 200 billion yuan, ranking among the top 500 private enterprises in China.

However, the business world is full of ups and downs, and no one is invincible. Li Zhaoting, who earned his huge wealth through aggressive expansion, was doomed to fail in the era of macro-deleveraging.

Since 2019, Dongxu's listed companies have gradually lost their ability to generate revenue. From 2019 to 2023, Dongxu Optoelectronics and Dongxu Blue Sky have both suffered losses for five consecutive years, with the combined losses of the two listed companies approaching 15 billion.

Dongxu Group, the foundation of Li Zhaoting, performed even worse than its listed companies. From 2019 to 2023, Dongxu Group suffered losses for five consecutive years, with a total loss of more than 52 billion yuan.

As of the end of June 2023, Dongxu Group had a debt of 142.614 billion yuan, with an asset-liability ratio of about 84%, of which interest-bearing debt was nearly 100 billion yuan, short-term debt accounted for 94.03%, and monetary funds were only 3.264 billion yuan. By the end of 2023, many corporate bonds of Dongxu Group had defaulted, with a total defaulted principal of 12.062 billion yuan. According to the China Enforcement Information Disclosure Network, Li Zhaoting had 13 cases of enforcement.

Dongxu Group, which is in trouble itself, naturally finds it difficult to support its listed companies, and even treats its listed companies as ATMs.

In addition to Dongxu Optoelectronics, ST Xulan, another listed company controlled by Dongxu Group, was also illegally occupied by its parent company. As of the disclosure date of the 2023 annual report, Dongxu Group illegally occupied a balance of 7.796 billion yuan of ST Xulan's funds, accounting for 70.23% of the company's net assets during the period.

Affected by this incident, ST Xulan has also experienced a continuous limit-down trend recently, and its share price once fell to 1.01 yuan, just one step away from delisting. The former richest man in Shijiazhuang, who has long been stretched to the limit, may really panic in the face of the besieged listed companies under his control.

Even more panicked than Li Zhaoting are the nearly 300,000 shareholders of Dongxu Optoelectronics. If Li Zhaoting's loss is just a profit-taking in the ups and downs of the business world, the uninformed small retail investors are innocent victims who lost all their money.

Strict delisting is an important means to improve the market ecology and promote metabolism, but the premise must be full and timely information disclosure. In the current situation of information asymmetry, how to restrict the illegal operations of listed companies and how to protect the interests of investors from infringement by illegal enterprises are undoubtedly one of the most important institutional prerequisites for ensuring the healthy development of A-shares in the future.

Disclaimer

The content of this article related to listed companies is the author’s personal analysis and judgment based on the information disclosed by listed companies in accordance with their legal obligations (including but not limited to interim announcements, regular reports and official interactive platforms, etc.); the information or opinions in the article do not constitute any investment or other business advice, and Market Value Observation shall not bear any responsibility for any actions arising from the adoption of this article.