□ according to the new delisting regulations, the operating income shall be deducted from the income that has nothing to do with the main business and does not have commercial substance. Therefore, when issuing the letter of concern or inquiry, the regulators pay special attention to the authenticity of the operating income of relevant companies.
□ in order to protect the shell, listed companies will continue to “develop” new means, and the regulatory authorities will also meet with bidding. This process will also provide direct empirical evidence for improving the relevant systems of China’s capital market.
□ the registration system especially emphasizes the authenticity, accuracy and completeness of information disclosure. This requires the regulatory authorities to make the information more and more sufficient and the truth more and more clear through thorough inquiry.
According to the statistics of the reporter of Shanghai Securities News, as of February 9, 127 A-share companies have received attention letters or inquiry letters after publishing the performance forecast, of which 51 are “ST” family. In conclusion, based on the new delisting regulations, the supervision first focused on whether the “ST” family avoided the financial compulsory delisting indicators in 2021, and repeatedly asked whether to avoid delisting through large debt exemption; Secondly, the performance forecasts of a number of A-share companies highlight the sluggish main business, leading to repeated regulatory inquiries about countermeasures; Finally, problems such as questionable information disclosure are also concerned by regulators.
“This reflects the forward shift of the focus of daily supervision of the exchange.” Ye Xiaojie, director of the annual report research center of listed companies of Shanghai National Institute of accounting, said that compared with the post supervision of inquiry after the disclosure of the annual report, the above intensive ex ante supervision helps to give “preventive shots” in advance, urge the directors, supervisors and accounting firms of listed companies to be diligent and responsible, and is of positive significance to improve the quality of information disclosure of listed companies.
key point 1:
whether to avoid financial delisting indicators
Under the new delisting regulations, after 51 “ST” companies issued performance forecasts, regulators first focused on whether companies avoided financial delisting indicators.
Shenwu Energy Saving Co.Ltd(000820) announced on January 25 that the operating revenue is expected to be 120 million yuan to 140 million yuan in 2021, and the operating revenue after deduction is about 115 million yuan to 135 million yuan; The net profit attributable to the shareholders of the listed company (hereinafter referred to as “net profit”) ranges from 1.75 billion yuan to 2.2 billion yuan, and the net profit after deducting non recurring profits and losses (hereinafter referred to as “net profit after deducting non recurring profits and losses”) attributable to the shareholders of the listed company ranges from 9.39 million yuan to 14.06 million yuan.
In comparison, the operating revenue of Shenwu Energy Saving Co.Ltd(000820) in the first three quarters of 2021 was 1.5442 million yuan. The Shenzhen stock exchange requires the company to explain the reason and rationality of the sharp increase in operating revenue in the fourth quarter of 2021, the matching between the composition of relevant operating revenue and the scope of main business, whether to conduct surprise transactions at the end of the year to avoid delisting risk, and whether the recognition of relevant revenue meets the accounting standards for enterprises.
The above query of Shenzhen stock exchange is based on the delisting risk warning that Shenwu Energy Saving Co.Ltd(000820) has been implemented since 2018. At the end of 2020, the net assets of the company were less than 100 million yuan, of which the net income was negative in 2020.
According to the new delisting regulations, listed companies were warned of delisting risks because of the fact that the audited net profit in the latest fiscal year was negative and the operating income was less than 100 million yuan. The delisting indicators related to finance in the first fiscal year will be terminated. In addition, the operating income shall be deducted from the income that has nothing to do with the main business and does not have commercial substance. Therefore, when issuing the letter of concern or inquiry, the regulators pay special attention to the authenticity of the operating income of relevant companies.
The Shenzhen stock exchange requires Shenwu Energy Saving Co.Ltd(000820) to check and explain the compliance and accuracy of the deduction of the company’s operating income item by item according to the relevant provisions of the guidelines for the self discipline supervision of listed companies No. 1 – business handling, and whether the operating income after deduction in 2021 is less than 100 million yuan, supplement and disclose the relevant performance forecast and timely Fully disclose risk tips.
Ye Xiaojie believes that as a new delisting regulation, it is also facing a new test after blocking the common loopholes in the past. If ST companies abuse the new delisting rules and evade delisting by manipulating the operating revenue to reach 100 million yuan, it is undoubtedly contrary to the original intention of the new delisting rules. Therefore, the supervision will urge ST companies to disclose more information through letter inquiry, and also urge accounting firms to pay more attention to this matter in the follow-up audit, which will lay a solid foundation for the implementation of the new delisting regulations.
For the above circumstances of evading the financial compulsory delisting indicators, the Shanghai stock exchange directly warned the relevant A-share companies in some inquiry letters. For example, in the inquiry letter, the Shanghai Stock Exchange told Hna Innovation Co.Ltd(600555) that if the company is suspected of not deducting the operating income in accordance with the regulations and avoiding the termination of listing, the Shanghai Stock Exchange will timely request the start of on-site inspection and other regulatory measures as appropriate after the company discloses the 2021 annual report. If, according to the final on-site inspection results, the company touches the situation of terminating the listing after deducting the relevant influence, the Shanghai Stock Exchange will make a decision on terminating the listing of the company in accordance with the law and regulations, and impose disciplinary sanctions on the company and relevant responsible persons.
key point 2:
whether to exempt large debts from delisting
Many companies such as Jinzhou Cihang Group Co.Ltd(000587) , Jiangsu Huasheng Tianlong Photoeletric Co.Ltd(300029) , Gi Technologies Group Co.Ltd(300309) have implemented large debt forgiveness before issuing performance forecast.
Jinzhou Cihang Group Co.Ltd(000587) on January 7, it was announced that the company received two notice letters of debt exemption from Xiamen zhongrunboguan Asset Management Co., Ltd. and Fenghui Leasing Co., Ltd., which exempted the company’s debt by a total of 1.411 billion yuan, and the date of debt exemption was December 31, 2021.
As of September 30, 2021, the net assets of Jinzhou Cihang Group Co.Ltd(000587) were -177 million yuan. By January 29, 2022, Jinzhou Cihang Group Co.Ltd(000587) announced that the net assets at the end of 2021 are expected to be 216 million yuan to 316 million yuan, mainly due to the large debt exemption, and the capital reserve is expected to increase by 1.2 billion yuan to 1.5 billion yuan. In this regard, the Shenzhen stock exchange requires Jinzhou Cihang Group Co.Ltd(000587) to explain whether there is a situation to avoid delisting risk through this debt exemption.
In the view of insiders, in the face of the most stringent new delisting regulations in history, the “special drugs” previously used to protect the shell have failed, and the current debt exemption has become a new life-saving straw for relevant companies. According to the new delisting regulations, after the listed company touches the financial delisting indicators and is warned of delisting risk, the net assets at the end of the audited period in the first fiscal year are negative, or the net assets at the end of the most recent fiscal year are negative after retroactive restatement, the listing will be terminated.
According to a financial source, according to the current accounting standards, debt exemption can reduce the debt and thicken the book net assets of listed companies. If the exemption amount is greater than the loss amount of net assets, debt exemption can immediately turn the net assets from negative to positive, so as to avoid the delisting index with negative net assets at the end of the period.
Also at the end of 2021, Gi Technologies Group Co.Ltd(300309) shareholder Gao huaixue plans to exempt the company’s debt. As of December 29, 2021, Gi Technologies Group Co.Ltd(300309) still owed Gao huaixue a total of about 128 million yuan in principal and interest. Gao huaixue agreed to exempt the company from all repayment obligations of about 128 million yuan in principal and interest on December 30, 2021, so as to reduce the company’s operating burden and have a positive impact on the company’s asset liability ratio and net assets.
Shenzhen stock exchange requires Gi Technologies Group Co.Ltd(300309) to explain: “whether this debt relief has commercial substance, the specific reasons for shareholders’ debt relief, whether there are undisclosed agreements or arrangements, and whether the company has other obligations for debt relief.”
Although Gi Technologies Group Co.Ltd(300309) denied the above doubts in the reply to the concern letter, it announced on January 26 that the net profit in 2021 is expected to be negative, the operating income is less than 100 million yuan and the net assets are negative. The company will be warned of delisting risk after the disclosure of the 2021 annual report.
Ye Xiaojie said that from the inquiry of the regulators, it can be seen that listed companies will continue to “develop” new means in order to protect the shell, and the regulatory authorities will also meet with the bidding. This process will also provide direct empirical evidence for improving the relevant systems of China’s capital market.
key point 3:
Whether has the ability of going concern
The ability of going concern is the key point of supervision. Take Lead Eastern Investment Co.Ltd(000673) as an example, the company’s main business covers TV dramas, theater operations, cloud computing, big data, it system integration business, etc. the net profit after deducting non profits in 2018, 2019 and 2020 is expected to be lost in 2021.
Lead Eastern Investment Co.Ltd(000673) on January 29, it was announced that the net profit loss in 2021 is expected to be 120 million yuan to 130 million yuan, and the net profit loss after deduction is 220 million yuan to 230 million yuan. The non recurring profit and loss is mainly the investment income and performance compensation from the disposal of cinemas.
The Shenzhen Stock Exchange pointed out that the net profit after deduction of Lead Eastern Investment Co.Ltd(000673) will be negative for four consecutive years, and the operating income will decline year by year. It is necessary to explain whether there is a significant adverse impact on production and operation and whether there is a significant uncertainty about the ability of sustainable operation.
In the face of Shenzhen Hemei Group Co.Ltd(002356) ‘s poor ability to continue operations, the Shenzhen Stock Exchange explicitly asked it to explain the specific measures and latest progress taken to eliminate the matters covered by the qualified opinions in the 2020 audit report, whether there is significant uncertainty in the ability to continue operations, and whether there is a risk of termination of listing.
Shenzhen Hemei Group Co.Ltd(002356) announced on January 29 that the company expects a net profit of 716 million yuan to 915 million yuan and a net profit loss of 201 million yuan to 400 million yuan after deduction in 2021. The change in operating performance mainly comes from non recurring profits and losses such as debt restructuring income and equity disposal income, with an impact amount of about 1.1 billion yuan.
Looking back on the financial report of Shenzhen Hemei Group Co.Ltd(002356) 2020, the audited institution issued an audit report with qualified opinions, including major uncertainties in going concern. Among them, the company suffered serious losses in 2019 and 2020. As of December 31, 2020, the net asset loss was 2.266 billion yuan, and there were a large number of external guarantees and overdue debts, leading to a number of lawsuits and arbitrations, and a large number of assets were frozen.
For Citychamp Dartong Co.Ltd(600067) and other companies, the Shanghai stock exchange directly requires, in combination with the current operation, finance and other aspects, to supplement and disclose the solutions and countermeasures taken and proposed to be taken for the continuous decline of performance, and fully reveal the relevant risks.
Citychamp Dartong Co.Ltd(600067) the net profit has continued to decline since 2019. It is expected that the net profit loss after deducting non-profit will be RMB 880 million to RMB 980 million in 2021, which will turn from profit to loss compared with 2020. Citychamp Dartong Co.Ltd(600067) said that the company’s lithium battery business faced many difficulties in 2021. It plans to make provision for impairment of fixed assets and adjust the sales price of some real estate projects to make the net realizable value lower than the cost. It plans to make provision for inventory depreciation.
key point 4:
compliance of information disclosure
Under the background of information disclosure as the core, it is further clarified that A-share companies should truly, accurately, completely, timely and fairly perform the obligation of information disclosure.
Lvjing Holding Co.Ltd(000502) on January 28, it was announced that the expected operating revenue in 2021 was 150 million yuan to 175 million yuan, mainly due to the wholly-owned subsidiary Shenzhen Hongyi Construction Engineering Co., Ltd. (hereinafter referred to as “Shenzhen Hongyi”) actively carrying out special engineering construction business of data center.
In this regard, the Shenzhen Stock Exchange questioned whether there are problems such as untimely information disclosure in Lvjing Holding Co.Ltd(000502) . Shenzhen Hongyi and the third construction (Shenzhen) Co., Ltd. of China Construction Fifth Bureau signed the professional subcontract for cable bid I project of Guangdong Ruiqing times lithium ion battery production project, with the construction period from September 1, 2021 to December 31, 2021. It can be seen from the comparison that the construction period agreed in the above contract starts from September 1, 2021, Lvjing Holding Co.Ltd(000502) is not announced until October 26, 2021, and the information disclosure is delayed by nearly two months.
More seriously, the information disclosure of Jiangsu Chengxing Phosph-Chemical Co.Ltd(600078) may involve periodic reporting errors. Jiangsu Chengxing Phosph-Chemical Co.Ltd(600078) announced on January 29 that the operating revenue is expected to be 3.747 billion yuan in 2021, and the net profit after deduction is 79 million yuan to 118 million yuan. Compared with the company’s net profit after deducting non-profit of 94 million yuan in the third quarter of 2021, it is preliminarily estimated that the company’s net profit after deducting non-profit decreased sharply in the fourth quarter of 2021.
The Shanghai stock exchange requires Jiangsu Chengxing Phosph-Chemical Co.Ltd(600078) to carefully verify whether there are major misstatements in the third quarterly report of 2021, including but not limited to whether there are false increases in revenue, under counting costs, expenses, etc. If yes, the company shall explain the reasons for the misstatement, immediately correct the relevant data and investigate the relevant responsible person.
More paradoxically, Jiangsu Chengxing Phosph-Chemical Co.Ltd(600078) issued the 2021 performance forecast, saying: “we have fully communicated with the accounting firm on matters related to the performance forecast, and there are no differences with the accounting firm on the performance forecast.” The relevant accounting firm said: “the basis for the positive conversion of the company’s net assets is insufficient.”
“The company shall standardize information disclosure, fully remind the delisting risk, and effectively protect the right to know of small and medium-sized investors.” The Shanghai stock exchange requires Jiangsu Chengxing Phosph-Chemical Co.Ltd(600078) to correct the performance forecast as soon as possible in a responsible attitude to investors. After correcting the performance forecast, the net assets are expected to be negative, and there is a risk of termination of listing, which should be fully prompted.
Ye Xiaojie concluded that the registration system especially emphasizes the authenticity, accuracy and integrity of information disclosure, because all parties in the market ultimately make decisions based on information. The problem of information disclosure in the company’s performance forecast may be unintentional or intentional. This requires the regulatory authorities to make the information more and more sufficient and the truth more and more clear through thorough inquiry.
