On May 17, 2019, the Shanghai Stock Exchange (SSE) decided to delist the stocks of the two companies *ST Hareon Solar Technology Co., Ltd. (*ST Hareon for short) and *ST Shanghai Potevio Co., Ltd. (*ST Shanghai Potevio for short). The decision to delist the two companies once again showed the market that the SSE has effectively taken up the main responsibility of delisting, strictly controlled the delisting exit, and adhered to the regulatory attitude of “delisting each company that should be delisted”. New progress has been made in the legalization, marketization and normalization of delisting SSE-listed companies.
1. The decision of delisting the two companies was made in accordance with the laws and rules, fully embodying the principle of "law-based governance of market ".
*ST Hareon triggered three mandatory delisting standards including net asset, net profit and type of opinions on audit report; *ST Shanghai Potevio decided to delist its stocks voluntarily with the deliberation and resolution of its shareholders' meeting. Although the two companies had different delisting triggers, the SSE has decided to implement the delisting of both companies in strict accordance with the “SSE Rules for Stock Listing” (the “Stock Listing Rules” for short),. In terms of procedures, after carefully examining the matters concerning the delisting of the stocks in the two companies, the SSE Listing Committee believed that the delisting of the two companies had clear facts and definite basis, and fully agreed to delist the stocks of the two companies. According to the audit opinion of the Listing Committee, the SSE has decided to delist the stocks of the two companies according to the laws and rules, which fully embodies the principle of “law-based governance of market”.
Specifically, the 2016 and 2017 annual financial accounting reports of *ST Hareon had been the audit reports in the type of disclaimer of opinion issued for two consecutive years, and the listing of the stocks was suspended since May 29, 2018. On April 30, 2019, *ST Hareon disclosed its 2018 annual report, in which the relevant financial indicators triggered the three mandatory delisting standards including net asset, net profit and type of audit report opinions specified in Item (1) of Article 14.3.1 of the “Stock Listing Rules”. As *ST Shanghai Potevio recorded losses for three consecutive years, the listing of the A shares and B shares of the company was suspended since May 29, 2018. On April 9, 2019, the company held a shareholders’ meeting, considering and approving the proposal of voluntary delisting. The resolution shows that 98.71% of the total voting rights held by all shareholders attending the meeting were in favor, and 89.18% of the total voting rights held by the minority shareholders present at the meeting were for the proposal, which was in line with the provisions of Articles 14.4.1 and 14.4.2 of the “Stock Listing Rules” regarding the voluntary termination of listing.
2. With risk warnings issued repeatedly before the delisting of the two companies, the market and investors have had adequate expectation.
Just as an old saying goes, “Rome was not built in a day”, the delisting of the two companies was caused by their own mismanagement as well as the problems in regulated operation. Specifically, *ST Hareon has been sluggish in business for a long time since its reorganization and listing, suffering the losses for many years, and has been publicly criticized repeatedly by the SSE for the problems in information disclosure and corporate governance. With the main business trapped in troubles, *ST Shanghai Potevio could not stop the losses for a long time, lacked the ability to save itself, and were publicly condemned by the SSE repeatedly for the violations in information disclosure such as failing to release the periodic reports and unauthentic financial information. It can be said that the problems exist in the two companies have been brought "on the table", and the market and investors have well noticed them "in the eyes".
Regarding the delisting risks of the two companies, the SSE has repeatedly urged the companies to fully disclose the risks to the market and investors. Earlier, after the delisting risk alert was imposed, *ST Hareon and *ST Shanghai Potevio released a total of nearly 10 delisting risk warning announcements respectively, which reminded the investors to pay attention to the risk of delisting faced by the companies and make decisions prudently to avoid losses. At the same time, the SSE also required the two companies to fully respond to the concerns of the investors and earnestly take measures to protect the interests of the investors, especially the small and medium-sized investors. Based on these circumstances, the market and investors have already adequately understood and expected the delisting of the two companies. Generally speaking, these efforts were always made in accordance with the market-based requirements to fully urge all the market participants to take their due responsibilities, having ensured the smooth implementation of the delisting.
3. As there have been companies delisted every year in recent years, the SSE has achieved the normalization of the delisting on the whole.
In recent years, under the guidance of the China Securities Regulatory Commission (CSRC), the SSE has continuously strengthened the reform of the delisting system, shouldered the responsibility of the forefront organizer of delisting, and implemented a number of first-times cases of delisting in the capital market, such as the first voluntary delisting, the first delisting of a centrally-administrated stated-owned company and the first delisting for major violations. The circumstances of *ST Shanghai Potevio and *ST Hareon delisted this year are also different, as one is voluntary delisting and the other is compulsory delisting. These efforts show that the SSE has normalized the institutional arrangements and practical operations for delisting, and the work in delisting has also been fully understood and supported by all market participants. With the delisting normalized, exiting the main board market on the SSE means that a company has not lost its legal entity qualification, and instead, it is only not suitable for further listing on the main board of the SSE and should be withdrawn from the board. After the company is delisted, it can continue to work hard to improve its performance and vigorously restore its ability of vitalization, and its shares can also be listed on the National Equities Exchange and Quotations (NEEQ) in accordance with the laws and rules.
In the specific work arrangements, the SSE has established a relatively mature working mechanism. In the issues such as the risk alerts and information disclosure of the two companies and the cash option arrangements for the investors in *ST Shanghai Potevio, the business processes and work arrangements have been smoothly and orderly advanced and implemented. In the next stage, *ST Hareon will enter the delisting arrangement period, with the ticker symbol changed into “Delisted Hareon” and the daily price limit adjusted to 10%, and after being traded for a total of 30 trading days, the stock will be delisted. It is hereby necessary to especially remind relevant investors that the setting of the delisting arrangement period is mainly to provide investors with a window for trading exit. The investors should invest rationally and refuse to follow the trend of speculation. In addition, *ST Shanghai Potevio chose the voluntary delisting, and according to the rules it will no longer enter the delisting arrangement period.
The delisting of listed companies is a basic operating mechanism for the purpose of the survival of the fittest and the new superseding the old in the capital market, and it is also a necessary arrangement for the market to clear out risks. Recently, in the speech at the 2019 Annual Meeting of the China Association for Public Companies, CSRC Chairman Yi Huiman specially pointed out that the companies that seriously disrupt market order and trigger the delisting criteria should be definitely and thoroughly delisted, so as to facilitate the timely elimination of the “zombie enterprises” and “shell companies”. The SSE will resolutely implement the spirit of the speech, focus on improving the quality of listed companies, strictly enforce the delisting system, effectively check the delisting exit, strive to cultivate the market ecology of the survival of the fittest, urge the listed companies to concentrate on the main business and improve operations, and maintain the healthy development of the securities market. While making the decisions on delisting the stocks in the two companies, the SSE also decided to suspend the listing of the shares in *ST Jiangsu Protruly Vision Technology Group Co., Ltd. in accordance with the laws and rules. Going forward, if the company fails to meet the conditions for resumption of listing during the suspension of listing, the listing of its shares will also be absolutely terminated.
