"Face value delisting" is gradually approaching, why did ST Selen come to this? Delisting Mirror

On July 1, ST Xinlun continued to fall at the opening, with a share price of only 0.64 yuan per share, basically locking in the "delisting at face value".

As a listed company founded in 2002 and successfully listed on the Shenzhen Stock Exchange in 2010, ST Selen has continued to expand its business territory through capital acquisitions in the past ten years, and attempted to achieve transformation and development, but it has also formed a huge goodwill. As the acquired company turned from profit to loss, ST Selen also had to swallow the "bitter fruit" brought by mergers and acquisitions.

After the audit institution issued a "non-standard opinion", ST Xinlun was abandoned by the capital market, and its share price fell from 2.73 yuan/share on May 6 to 0.74 yuan/share on June 12 under the blow of 26 falling limits. Although the company immediately announced the launch of bankruptcy reorganization and the platform of Lalai Gree Group, its stock price also recovered for a time, but it was difficult to get rid of the shadow of forced delisting of transactions.

What has happened to ST Selen in the past 15 years? And why is it moving towards "delisting at face value"?

Operation to protect the "shell" failed

ST Selen basically locks in "delisting at face value"

On July 1, ST Selen harvested its 34th fall limit since the first trading day in May. As of press time, ST Selen's share price has been below 1 yuan per share for 19 consecutive trading days.

According to the regulations, if the closing price of the listed company's shares is lower than 1 yuan for 20 consecutive trading days, the company's shares will be terminated by the Shenzhen Stock Exchange. In addition, if the company's shares are terminated due to the forced delisting of transactions, the company's shares will not enter the delisting period. ST Selen is only 1 trading day away from "delisting at face value".

The sharp drop in ST Selen's share price is related to the fact that the stock is "capped". Prior to this, due to the negative net profit of ST Selen before and after deduction for three consecutive years in 2021, 2022 and 2023, and the company's 2023 annual audit report shows that "there is uncertainty about the company's ability to continue operations", the company's shares have been subject to "other risk warnings" since May 6, 2024, and have received the first falling limit since May.

After the stock price fell below 1 yuan per share, ST Selen quickly started to protect the "shell". On the one hand, the company applied to the people's court with jurisdiction for reorganization and pre-reorganization on the grounds that it was unable to pay off its debts due and obviously lacked solvency, but had reorganization value, so as to avoid further deterioration of the debt risk and operational risk of the listed company. On the other hand, it also signed a "Cooperation Framework Agreement" with Gree Financial Investment, a subsidiary of Gree Group, and the cooperation areas cover production capacity landing, restructuring debt, corporate bailout, industrial investment, etc.

On the evening of June 12, ST Selen announced that the impact of some of the matters mentioned in the company's 2023 annual audit report has been eliminated. Beginning in the evening of the same day, ST Xinlun's share price stopped falling and rebounded, and the stock price once rose to 0.95 yuan / share. However, due to the fact that the major uncertainty that has caused major doubts about the company's ability to continue operations has not been eliminated, the company's stock price has once again fallen continuously since June 20, and the efforts to protect the "shell" have also tended to be aborted.

In terms of financial data, ST Xinlun's operating income in the past four years has dropped from 2.247 billion yuan to 663 million yuan, and the cumulative loss of net profit attributable to the parent company is 4.738 billion yuan, and at the end of 2023, the company's current liabilities are 2.298 billion yuan higher than the total current assets, and the asset-liability ratio is as high as 94.60%; Due to litigation, 11,183,700 yuan of bank deposits were frozen, and bank loans were overdue of 782 million yuan.

Rely on ultra-clean business to land on A-shares

Expand your business through capital acquisitions

According to public information, ST Selen was founded by Hou Yi in 2002 and landed on the small and medium-sized board of the Shenzhen Stock Exchange in 2010, and its main business is the research and development, production and sales of anti-static/clean room consumables, and it is the leader in the domestic anti-static/clean room industry.

At the time of the IPO, the company raised 437 million yuan, of which 216 million yuan was used to invest in three main business-related projects, and 60 million yuan of the 200 million yuan of the over-raised funds was used to establish a chain of ultra-clean cleaning centers in six cities.

However, the good times did not last long, and in 2012, the net profit growth rate of ST Selen fell from 75.48% in the previous year to 17.35%. In 2013, the net profit growth rate of ST Selen continued to drop to 16.38%, 2 fund-raising projects were completed, and the cumulative realized income was far from expectations, and the chain ultra-clean cleaning center project also suffered losses.

Also in 2013, ST Selen's transformation road was officially put on the agenda, and it will gradually transform into a comprehensive service provider in the industry based on new materials. In March of that year, ST Selen raised 670 million yuan, of which 500 million yuan was planned to be invested in Tianjin Industrial Park to implement purification equipment product projects, anti-static, clean room consumables projects, ultra-clean cleaning centers, etc.

But only a year later, ST Selen made a big adjustment to the fundraising project. The anti-static and clean room consumables project was adjusted to the fresh air purifier product project, the purification equipment product project was terminated, and the investment in the fresh air purifier product project was later stopped. This means that the 500 million yuan fundraising project that ST Selen intends to invest in is terminated.

Due to the failure of the two fundraising projects to meet expectations, in 2014 and 2015, the profitability of ST Selen continued to decline, and in 2015, it suffered its first loss since listing, with a loss of 107 million yuan.

In 2016, in order to further promote the transformation, ST Selen once again raised 1.75 billion yuan for the TAC functional optical thin film material project, and in early 2017, 250 million yuan was invested in the high-performance packaging material project for lithium battery cells.

At the same time, ST Selen has also successively acquired 51% of the shares of Shenzhen Pengkuo Precision, T&TEnertechno Co., Ltd. lithium-ion battery aluminum-plastic composite film business, and 49% of Jiangtian Precision. In October 2017, ST Selen also acquired 100% of the shares of Qianhong Electronics by issuing shares and paying cash, with a transaction price of up to 1.5 billion yuan.

A series of mergers and acquisitions have also gradually expanded the business scope of ST Selen, and the operating income and net profit have increased significantly. In 2017 and 2018, its operating income reached 1.726 billion yuan and 3.151 billion yuan, and the corresponding net profit was 79.15 million yuan and 289 million yuan.

The sequelae of mergers and acquisitions appeared, and financial fraud occurred

Sold to state-owned assets and was stillborn

"M&A is a double-edged sword, it can help you succeed quickly, but it can also get you down the abyss quickly." Guo Xingfang, director of the Institute of Finance and Securities of Henan University, said that the greater the goodwill formed by mergers and acquisitions, the greater the impact of impairment on the company in the future.

In 2019, ST Selen's revenue reached an unprecedented 3.322 billion yuan, but the corresponding net profit fell to 9.8808 million yuan, a year-on-year decrease of 96.58%. In 2020, the company's net profit turned from profit to loss, and the scale of the loss was as high as 1.29 billion yuan.

At the same time, the negative effects of mergers and acquisitions have gradually become prominent. For example, after the remaining 49% of Jiangtian Precision's equity was acquired, the profit turned from positive to negative, and the loss scale reached 17.2289 million yuan. Selen Composite Materials Technology (Changzhou) Co., Ltd., the core body of the aluminum-plastic film business, suffered a loss in 2019 and further expanded in 2020. Qianhong Electronics, which is a precision manufacturing company of ST Xinlun, will have a year-on-year decrease of 1.073 billion yuan in operating income in 2020, a decrease of 72.63%, and a goodwill of 1.251 billion yuan formed by the merger and acquisition of the company, and 620 million yuan will be provided in 2020.

It is worth noting that the significant increase in accounts receivable and inventory brought about by the expansion of business scale will not only lead to asset impairment and eat up net profit, but also squeeze out the company's working capital. Although ST Selen has repeatedly raised funds to replenish liquidity and repay loans, its liquidity shortage has not been effectively alleviated.

Under heavy pressure, Hou Yi, the actual controller of ST Selen, signed a strategic cooperation agreement with the Management Committee of Yinchuan Economic and Technological Development Zone (hereinafter referred to as the Management Committee of Yinchuan Economic and Technological Development Zone) and the State-owned Assets Supervision and Administration Commission of Yinchuan City in November 2019. Hou Yi agreed to make the Yinchuan Economic Development Zone Management Committee and Yinchuan State-owned Assets Supervision and Administration Commission the actual controllers of the Company by means including but not limited to voting rights waiver, voting rights entrustment and equity transfer, and the above-mentioned transferee agreed to provide relief support to Hou Yi through its designated entity.

If this cooperation is reached, the new production capacity of ST Selen will land in Yinchuan, and the registered address of the headquarters will be moved to the area designated by the Management Committee of Yinchuan Economic and Technological Development Zone. The Management Committee of Yinchuan Economic Development Zone and Yinchuan State-owned Assets Supervision and Administration Commission will also provide 800 million yuan of financial support for Selen Technology. However, the collaboration was eventually terminated in May 2021.

During this period, ST Selen's financial fraud occurred in the East Window. According to the investigation results of the China Securities Regulatory Commission, in 2016~2018, through fictitious trade business, ST Selen inflated its operating income by 337 million yuan, 338 million yuan, and 62.34 million yuan respectively; The inflated profits were 76.4334 million yuan, 93.305 million yuan and 10.723 million yuan, accounting for 142.73%, 50.67% and 3.03% of the total profits for the current period.

At the same time, ST Selen also concealed 135 million yuan and 338 million yuan of related party transactions in 2017 and 2018, and violated guarantees of 400 million yuan in 2017.

There is uncertainty in the company's operations

No one cares about the auction of the actual controller's equity

After ST Selen announced the CSRC's administrative penalty decision in May 2020, ST Selen's then chairman Hou Yi, independent director Zeng Xuezhong, director and vice president Weng Tiejian, vice president Hou Haifeng, and vice president Di Yue resigned successively, while vice chairman Liao Yao assumed the position of acting chairman and president, and exercised the rights of the company's legal representative, and then officially became chairman and president in January 2021.

However, in the face of the situation that ST Xinlun is difficult to return, even if Liao Yao has rich experience in the capital market, he cannot solve the complex situation that entangles ST Xinlun and fails to effectively reverse the decline in development.

In 2021 and 2022, ST Selen's operating income will decline to 1.332 billion yuan and 979 million yuan respectively, and the corresponding loss scale will be 1.268 billion yuan and 1.233 billion yuan respectively. The scale of current liabilities was 2.76 billion yuan and 3.005 billion yuan respectively, and the corresponding current assets were only 1.473 billion yuan and 944 million yuan, which shows the debt pressure of enterprises.

As of the end of 2022, the total amount of ST Selen's overdue loans at the end of the period reached 806 million yuan, but its monetary funds were only 34.582 million yuan, corresponding to short-term borrowings of 1.479 billion yuan, and long-term borrowings of about 316 million yuan.

In 2023, ST Selen's revenue scale will drop to 662 million yuan, but due to the impact of large investment in the early stage and heavy historical burden, its loss scale will still be as high as 947 million yuan. As for the reasons for the decline in business scale, ST Selen explained that it was mainly due to the strategic contraction of non-material business. However, the auditor China Audit Asia Pacific did not buy it and issued a non-standard audit report on its 2023 annual report. Combined with the financial data performance of listed companies, China Audit Asia Pacific believes that "there are major uncertainties that may lead to significant doubts about Selen Materials' ability to continue operations. ”

Since the beginning of this year, under the tone of strong supervision of the capital market, it has been named "ST" and "there is significant uncertainty in operating ability", which has also made ST Selen lose its investment value, and the accelerated exit of investors has driven the stock price to fall below 1 yuan rapidly.

On June 24, at the site of the third extraordinary general meeting of shareholders of ST Selen in 2024, the "Proposal on Applying to the Court for Reorganization and Pre-reorganization" and "Proposal on Requesting the Company's General Meeting of Shareholders to Authorize the Board of Directors and Persons Authorized by the Board of Directors to Handle Matters Related to the Reorganization and Pre-reorganization of the Company and Related Subsidiaries" were all approved by a high vote.

However, from 10 a.m. on June 25 to 10 a.m. on June 26, the Shenzhen Futian District People's Court held a public auction of 51,273,279 shares held by Hou Yi on the Taobao judicial auction network platform (the starting price is the average closing price of the 20 trading days before the auction day multiplied by 80%), but no one cared.

Editor-in-charge: Shi Jian | Reviewer: Zhang Yipeng | Review: Li Zhen | Supervisor: Wan Junwei