On December 4, 2019, in accordance with the relevant provisions of the "Rules for Stock Listing", the Shanghai Stock Exchange (SSE) made the decision to terminate the listing of shares in Beijing Huaye Capital Holdings Co., Ltd. (“*ST Huaye” or the “Company” for short, code: 600240) on the basis of the review opinions of the Listing Committee. The Company was delisted due to its stock price continuously staying below the face value, the delisting of the Company is a reflection of the Company's fundamentals, a result of rational investment by investors, and a market choice. The SSE will continuously enforce the delisting rules, resolutely delist the companies that have met the criteria for compulsory delisting, and effectively improve the overall quality of the listed companies.
The delisting of the Company’s shares is based on proven facts, and it is necessary to implement the delisting according to the rules.
From October 16 to November 12, 2019, *ST Huaye saw its daily closing price stay lower than the par value of the stock for 20 consecutive trading days, triggering the requirements for terminating the delisting stipulated in Item 5 in Article 14.3.1 of the “Rules for Stock Listing” of the SSE. Therefore, it was necessary to implement the delisting. According to the provisions of Article 14.3.8 of the "Rules for Stock Listing", the Company's shares had the trading suspended starting on November 13.
Subsequently, the SSE made the decision to terminate the listing of shares in *ST Huaye in strict accordance with the relevant provisions of the “Rules for Stock Listing”. On November 12, the SSE notified the Company that it had the right to defend itself and could apply for a hearing. On November 18, the Company applied for a hearing, and the SSE accepted the application on November 19 and issued a notice of hearing meeting to the Company. On November 27, the SSE Listing Committee held a hearing meeting to fully listen to the Company's statements and defense opinions on site; on the same day, the Listing Committee also convened a meeting to review the termination of listing of shares in the Company, and considered that the Company's shares had triggered the circumstances of delisting for the face value stipulated in the "Rules for Stock Listing" and there was no basis in rules for the Company’s application for exemption from delisting, with the review opinion on the termination of the listing of shares in *ST Huaye made as a result; on December 4, the SSE made the decision to terminate the listing of shares in *ST Huaye based on the review opinion of the Listing Committee. In the termination of the listing of shares in *ST Huaye, the facts were proven, the rules were definite and the procedures were in compliance with the rules.
The delisting of the Company's stock was a true reflection of the Company's fundamentals, and the risks of delisting had been fully disclosed in advance.
*ST Huaye's stock price continued to be lower than the face value, which truly reflected the Company's fundamentals, and the stock was delisted for this reason as a result of investor choice. *ST Huaye saw its internal control fail, major risks break out in the business of account receivable debt investment, itself involved in multiple claims and guarantee lawsuits, and some assets and bank accounts closed down and frozen. The Company recorded a loss of RMB6.438 billion in 2018 and a loss of RMB5.049 billion in the first three quarters of 2019, with the net assets at RMB-4.82 billion at the end of the period. The Company’s subsidiaries violated rules to provide large-amount guarantees for related parties, with the amount involved reaching RMB1.713 billion. There are significant uncertainties in the Company's capacity for continuous operation. In 2018, the Company had the negative opinion issued in the audit of internal controls, and the disclaimer of opinion provided in the financial report audit. In July 2019, the SSE imposed public censure and other sanctions on the Company, its actual controller and relevant persons liable because of the Company’s violations such as the imprudent operations in the creditor’s right investment business and illegal guarantees. The China Securities Regulatory Commission (CSRC) officially launched the investigations into the alleged violations of the Company in information disclosure in July 2019.
In the process of delisting, at the regulatory urging, *ST Huaye fully warned against the risk of having the listing terminated due to the stock price being lower than the face value. On October 16, 2019, the Company's stock price fell below the face value, and On October 17, the Company issued an announcement on major events, warning against the risk of termination of listing. On October 29, the closing prices of the Company's stock were lower than the face value for 10 consecutive trading days. On October 30, the Company disclosed the first risk alert announcement for the termination of listing. Subsequently, the Company released the risk alert announcement daily. During the period when the stock price of the Company was continuously lower than the face value, the Company issued a total of 11 risk alert announcements, which fully revealed the risk of termination of listing in the market.
The SSE will continue to strictly implement the delisting system and advance the normalization of the delisting work.
The delisting system is a market selection mechanism. The withdrawal of a company from the main board of the SSE does not mean that the company has lost its legal entity status, but it is not suitable for the company to be further listed on the main board of the SSE. After the delisting, the company’s shares can be listed and traded on the National Equities Exchange and Quotations (NEEQ) in accordance with laws and regulations. If the company continuously works hard to improve its operations and vigorously restores its hematopoietic capacity, it can apply for re-listing when the requirements are met.
In recent years, under the guidance of the CSRC, the SSE has continued to propel the reform of the delisting system, shouldered the main responsibility for the frontline delisting work, and imposed delisting in accordance with laws and rules on a number of companies triggering the delisting requirements. The SSE has formed normalized institutional arrangements for delisting and practical operations, and the delisting work has also been fully understood and supported by all the market participants. This year, the shares in *ST Dalian Dafu Enterprises Holdings Co., Ltd. and *ST Huaye were delisted because of triggering the criterion of delisting for face value, specifically reflecting the normalization and the market-oriented development of the delisting mechanism. The SSE will continue to focus on improving the quality of the listed companies, strictly implement the delisting system, effectively check the delisting exit, strive to cultivate and form a market ecology that promotes survival of the fittest, push the listed companies to concentrate on their main businesses and enhance operations, and maintain the healthy development of the securities market.
