Xu Biao: The Influence Of Some Opinions On The Delisting System

In October 17th, the SFC issued a number of opinions on reform and improvement and strict implementation of the delisting system of listed companies. The main contents include 1, improving the active delisting system of listed companies; 2, the mandatory delisting system of major illegal companies; 3, strictly implementing market trading and financial mandatory delisting stock; 4, improving the relevant institutional arrangements related to delisting; and 5, strengthening the protection of investors' rights and interests of delisting companies.

The "opinion" is the refinement of the "perfect delisting system" in the nine new countries of May 9th. It clarifies the measures to protect investors in the process of delisting. The introduction of the rules means that the company that will execute the delisting will increase in the future, and the "passive delisting" will increase the cost of illegal activities of listed companies. "Active delisting" will affect the market valuation system by reducing the stock supply. In the long run, it will have positive significance for regulating the capital market, improving the quality of listed companies, cultivating value investment and protecting investors' rights and interests.

The "opinion" is bad for bad stocks, but it is good for blue chips and blue chip growth stocks.

With the increase of passive delisting cases of Listed Companies in the future, the market value of performance shares needs to be deducted from the value of shell resources, which will result in bad profits for high valuation performance stocks. While active delisting means good quality but valuations are underestimated, equity financing is no longer the best choice for companies to seek privatization, and then it can also choose higher valuation opportunities or market re listing, which is beneficial to blue chip stocks and blue chip growth stocks.

Concerned about undervalued and low financing demand mining, building materials, utilities, real estate (financing restricted) industry, to avoid declining performance of the industry.

The risk and opportunity of the stock market warning are coexisting. 28 stocks have been losing money for 2 consecutive years, and this year's report continued to lose money. The risk of delisting increased. But with the launch of the "opinion", the pace of restructuring of such companies will accelerate, and the success of restructuring will stimulate the stock price.

1, why do we have "opinions"? The answer is to implement the formulation of "perfecting the delisting system" in the nine new countries.

In May 9th, the State Council issued some opinions on further promoting the healthy development of the capital market. The market called it "the nine new country", and put forward the development of multi-level stock market and perfect the delisting system.

"To establish a delisting system that is in line with the reality of our country and is conducive to the protection of investors, and to establish and improve the market and diversified delisting index system and strictly implement it".

"Support the listed companies to take the initiative to withdraw the market in the form of merger, shareholder acquisition and pfer board based on their own development strategy and ensuring the rights and interests of the public investors."

"Compulsory delisting of listed companies fraudulent".

"Clear standards and procedures for re listing of delisting companies".

"Gradually forming a benign cycle mechanism of orderly retreat and smooth pfer of market".

2, what is the "active delisting" and its reasons? When the market is given a low valuation, the cost of equity financing is high.

Privatization as the main form of "active delisting" first appeared in the United States in the 70s, and many companies listed at the end of the 60s bubble period were privatized by buying shares held by the public after the share price plummeted.

After 2011, under the background of the domestic economic downturn, the United States listed stocks were questioned by muddy waters and other research institutions. They encountered serious trust crisis, and their share prices fell sharply. The low valuation led to the privatization trend of the stocks, including BMP, BJGP, CFSG, Kang Peng chemical (CPC), China Security (CSR) and so on.

3, "active delisting": retreat to advance, the company's financing needs are no longer urgent, and more concerned about long-term strategic development.

Listed companies need to follow strict information disclosure mechanism, which will sometimes be harmful to the long-term business development of the company. In 2012, the controversial Alibaba B2B privatization is based on the medium and long term strategy and needs to choose privatization to withdraw from the market.

4, where are the investment opportunities for "active delisting"? Low valuation and financing needs, and better industrial direction of operating cash flow, including mining, building materials and utilities. Besides, the real estate industry also has the driving force of "active market withdrawal" because of limited stock financing and low valuations, but its business nature is also limited.

It is more likely to be privatized through external shareholders (insurance institutions) rather than the original shareholders.

(Note: the measurement of financing demand is mainly through capital expenditure (purchase and construction of fixed assets, in construction projects) and current inventory status.

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5, what is the "passive delisting" and its causes? Triggering includes illegal compliance of listed companies, paction and financial indicators.

The opinion stipulates that

Two types of illegal activities involving major information disclosure are decided by the Securities Regulatory Commission according to law, or the public security organs are pferred to the public security organs on suspicion of committing a crime.

Transaction indicators include total capital stock, equity distribution, volume and market value.

Financial indicators include net profit, net assets, operating income and audit opinion type delisting indicators.

6, "

The market value of the underperforming stocks needs to be deducted from the value of shell resources, which is bad for the stocks with high valuation.

The industry direction where the financial indicators are not up to standard and the possibility of "passive delisting" includes the mechanical and military industries whose performance has declined for three consecutive years (2012-20142014 years in the Interim).

The risk of "passive delisting" may be a warning that stocks will be the focus of market competition, and risks and opportunities coexist.

On the one hand, a company that loses money for 2 consecutive years and continues to lose money in the middle of a report will be delisted if it fails to turn round the deficit in the second half of the year. On the other hand, with the launch of the "opinion", the pace of restructuring of such companies will accelerate, and the success of restructuring will stimulate the stock price.