Comment: Listed companies should not "retreat" and should implement measures to protect small and medium-sized shareholders

Interface News

2024-06-02 22:24Posted on the official account of Beijing Jiemian News

Interface News Reporter | Guo Jingjing

A-shares are speeding up the liquidation of "non-performing assets". According to the statistics of Jiemian News, this week (May 27 to June 2, 2024), 5 A-share companies, including *ST Mid-term (000996.SZ), *ST New Textile (002087.SZ), *ST Yuancheng (600766.SH), *ST Carbon Yuan (603133.SH), *ST Tongda (600647.SH), received the decision to terminate the listing of their shares, and the fate of delisting was determined. So far, since 2024, 14 A-share companies have been delisted.

Previously, 9 companies, including Century Xingyuan, Poten Environment, Xinhaiyi, Guirenniao, Hongda Xingye, Ideal Holdings, Oceanwide Holdings, Baibaolong and Huayi Electric, have completed their delisting.

According to statistics, as of June 2, Zhengyuan shares (600321.SH), *ST Baoli (300116.SZ), *ST Shimao (600823.SH), ST Zhongnan (000961.SZ), *ST Meishang (300495.SZ), *ST Zuojiang (300799.SZ), *ST Sansheng (300282.SZ), *ST Tai'an (002433.SZ), *ST Yuebo (300742.SZ), * More than a dozen A-share companies such as ST Tai'an (002433.SZ) have received prior notices of termination of listing, approaching the "cliff" of delisting.

The pace of delisting continues to accelerate, and the number of A-share companies that "wear stars and hats" is also increasing. Interface News statistics show that as of June 2, Jinzhou Port (600190. SH), ST Zhongzhuang (002822.SZ), ST Zhongtai (002092.SZ) and other 101 companies will be put on risk alert in 2024. Among them, the closing price of *ST Meiji (002621.SZ), ST Sunshine (600220.SH), ST Futong (000836.SZ) and other stocks has been lower than 1 yuan per share for many consecutive days, approaching the par value delisting warning line.

What cannot be ignored is that behind the above-mentioned hundreds of companies that have been delisted, are about to be delisted or on the verge of delisting, there are the "wails" of millions of investors. According to the company's latest disclosure of shareholders, as of now, the total number of shareholders of 101 "stars and hats" companies is about 5.392 million (not deduplicated). Among them, ST Akcome (002610.SZ) and *ST Jinke (000656.SZ), the top two shareholders, have more than 220,000 shareholders, and the few, such as *ST Hengyu (300965.SZ), also have 7,377 shareholders.

In addition, the number of shareholders of the nine companies that have completed the delisting is still about 484,100. The more than 480,000 investors have obviously been trapped, and the hope of achieving a return on investment or profitability in the short to medium term is even slimmer. *The 88,000 shareholders of the five companies that will be delisted including ST Medium-term, and the nearly 590,000 shareholders of more than 10 companies that have been locked in for delisting may not escape this fate.

As supervision continues to tighten, it will become normal for A-share companies to delist due to hitting the red line of financial, trading and other indicators. Investors in these companies will also increase. It is true that investment has its own profit and loss, and investors must be responsible for their own investment behavior. Investors should also adjust their investment ideas and strategies in a timely manner to avoid risky enterprises in a timely manner.

However, if a listed company fails to disclose risk information in a timely manner in accordance with laws and regulations, and suddenly "bursts" and touches the red line of delisting, or intends to "put it in a bad way" and "retreat", small and medium-sized investors at the end of the information chain may accidentally "step on the thunder", let alone "retreat from the whole body", and may not even have the opportunity to "cut meat and leave". With the gradual normalization of delisting, more small and medium-sized investors are experiencing or worrying about this situation.

For small and medium-sized investors, there is nothing more terrible than the fact that the listed company and its controlling shareholders, actual controllers, management and other parties intend to "retreat" in a "rotten" manner, and there is no corresponding protection measures for small and medium-sized investors, nor is there a medium and long-term plan to "resurrect" the listed company. This situation not only makes small and medium-sized investors in related companies "lose money and chill", but also directly damages the overall market confidence.

Investors are the foundation of the market. It is an undeniable reality that the majority of investors in the A-share market are still natural persons with small capital volumes. The author believes that with the gradual maturity of the A-share delisting mechanism, the supporting mechanism for protecting small and medium-sized investors must also mature and improve at the same time or even earlier.

On April 12, the China Securities Regulatory Commission formulated the "Opinions on Strictly Implementing the Delisting System", proposing to increase the clearance of "zombie shells" and "black sheep" through strict delisting standards, and reduce the value of "shell" resources; At the same time, we will broaden diversified exit channels and strengthen investor protection for delisted companies. Among them, the China Securities Regulatory Commission emphasized that it is necessary to implement compensation relief for delisted investors; Comprehensive use of representative litigation, advance compensation, professional mediation and other tools to protect the legitimate rights and interests of investors.

At present, if a listed company is investigated and punished by the relevant regulatory authorities for financial fraud, major shareholder funds occupation and other violations of laws and regulations, investors who have suffered losses can file a lawsuit and claim compensation from the relevant parties involved in the case, such as the controlling shareholder, actual controller, company executives or intermediaries. This is also the most common path for investors to recover.

As an investor protection institution under the Securities Law and a public welfare institution established by the China Securities Regulatory Commission, the China Securities Small and Medium-sized Investor Service Center (hereinafter referred to as the "Investment Service Center") has also made achievements in this regard. The Investment Service Center issued a document on April 12 stating that it supports investors in exercising their rights and protecting their rights, and promotes the improvement of the investor compensation and relief mechanism in the process of delisting; Support the "key minority" such as controlling shareholders, actual controllers, directors, and senior managers who are responsible for major illegal forced delisting, long-term failure to resolve capital occupation, etc., to pursue to the end, and require the responsible entities to bear civil liability for compensation in accordance with the law through shareholder subrogation litigation. As of May 15, 2024, the Investment Service Center has initiated a total of 9 shareholder subrogation lawsuits.

It has to be admitted that recovery by small and medium-sized investors through litigation is still a relatively long and arduous path. However, if the listed company and its controlling shareholder, actual controller, management and other parties have not touched the red line of violations of laws and regulations in the actual course of operation, and have never been investigated and punished by the regulatory authorities for being involved in violations of laws and regulations, investors may not even have a basis for recovery.

Even so, investors are reluctant to "admit it". *Small and medium-sized investors at ST Tongda (600647.SH) are trying to "save themselves". *ST Tongda claims to be the "platform unit of China Cinda Asset Management Co., Ltd. in Shanghai", and since 2014, it has carried out six capital actions to "protect the shell", but finally failed. On April 29, the company disclosed that the 2023 annual report was issued an audit report that could not express an opinion, and received a prior notice from the Shanghai Stock Exchange on the same day that it intends to terminate the listing of shares. On May 17, 14 natural person shareholders of *ST Tongda, which hold a total of 3.1352% of the shares, proposed that the company repurchase 30.8% to 46.2% of the company's shares at 14 yuan per share, with a total repurchase amount of 600 million to 900 million yuan.

Unfortunately, this plan was not approved at the *ST Tongda Annual General Meeting of Shareholders on May 28. The company's controlling shareholder, Cinda Investment, abstained from voting, and believed that the implementation of the share repurchase plan would result in a negative net asset attributable to *ST Tongda's parent company, which would have a significant adverse impact on its production and operation and subsequent development, resulting in the company's loss of ability to continue operating and debt performance, which did not comply with the relevant provisions of the CSRC's "Share Repurchase Rules for Listed Companies".

*ST Tongda shareholder representative city, which proposed the above-mentioned share repurchase plan, expects that the plan will most likely not be passed, "we actually want to put forward the proposal is to hope that Cinda Investment will increase its shareholding in the company as the controlling shareholder." At the general meeting of shareholders on May 28, representatives of Cinda Investment responded that many small and medium-sized shareholders have reported their demands to the China Securities Regulatory Commission, the Ministry of Finance, the Shanghai Stock Exchange and other relevant departments through various legal and compliance channels, and some of the demands have also reached China Cinda; The relevant requests, some of the protection measures for small and medium-sized investors are indeed being studied. Up to now, Cinda's protection measures for small and medium-sized investors have not been announced.

Admittedly, it is "progressive" that the proposal of *ST Tongda's minority shareholders to repurchase shares can be submitted to the company's shareholders' meeting for deliberation, although this plan has not been passed. However, for small and medium-sized investors, what they are more looking forward to is the attitude and practical actions given by listed companies, their controlling shareholders, actual controllers and other parties.

In the author's opinion, in addition to clearly involving the path of recovering claims for violations of laws and regulations, requiring listed companies, controlling shareholders, actual controllers and other parties that still have a certain amount of financial strength to directly compensate small and medium-sized investors by repurchasing or increasing their holdings of the company's shares, etc., can not only stabilize the sentiment of relevant investors, but also boost overall market confidence to a certain extent. This may also be the main reason why the *ST Tongda case has attracted much attention from the market.

At the "5.15 National Investor Protection Publicity Day" held by the China Securities Regulatory Commission, Wu Qing, chairman of the China Securities Regulatory Commission, emphasized that protecting the legitimate rights and interests of investors, especially small and medium-sized investors, is a concrete embodiment of the practice of "people-centered" development concept in the capital market; It is necessary to further unblock the channels for investors to protect their rights and remedies.

In general, the author believes that the normalization of delisting does not mean that the company can "withdraw from it", let alone ignore the legitimate rights and interests of small and medium-sized investors and "withdraw from it". At present, how to smooth the channels for investor rights protection and relief, how to improve the investor compensation and relief mechanism in the process of delisting in all aspects, and how to implement the protection measures for small and medium-sized investors have become one of the most concerned issues in the market, and it is also one of the problems that cannot be bypassed in the A-share market under the current strong regulatory situation.