① Recently, many "risk of delisting" stocks have received warning letters. The reason is mostly due to inaccurate information disclosure or incomplete disclosure of major events, leading to insufficient risk disclosure. ② Lawyers have said that if the main responsible parties in the disclosure process of a listed company make false statements or commit other illegal acts, investors' compensation rights are not affected by whether or not the company is delisted. Eligible investors can file claims.
On June 7th, Caixin reported that ST Huatie (000976.SZ) and the former chairman and secretary of the board received a warning letter from the Guangdong Securities Regulatory Bureau due to incomplete disclosure and insufficient risk warning related to cooperation with Hangshi Fund. In February 2021, ST Huatie announced its strategic cooperation agreement with Hangshi Private Equity Fund Management (Hangzhou) Co., Ltd. It was noted that the official WeChat account of ST Huatie has deleted the above statement. The Guangdong Bureau of China Securities Regulatory Commission pointed out that ST Huatie did not publish the above information on the exchange's website or in the media that met the conditions prescribed by the China Securities Regulatory Commission, and did not fully remind investors that the cooperation with Hangshi Fund has not yet reached a binding agreement document, there were significant uncertainties and risks, the relevant disclosure of information was not complete and the risk warnings were insufficient. The former chairman Xuan Ruiguo and secretary of the board Wang Ying bear the main responsibilities for these acts, and received the warning letter from the Guangdong Securities Regulatory Bureau.
On February 6th, ST Huatie announced its strategic cooperation agreement with Hangshi Private Equity Fund Management (Hangzhou) Co., Ltd., on its official WeChat account. It noted that Hangshi Private Equity would coordinate relevant industrial investment resources with the company to solve the problem of the controlling shareholder's capital occupation, actively participate in the risk resolution of the controlling shareholder's stock pledge financing, etc. In the meantime, currently ST Huatie's official WeChat account has deleted the above statement.
The Guangdong Securities Regulatory Bureau issued a warning letter today, which pointed out that ST Huatie did not release the above information on the exchange's website or in the media that met the conditions prescribed by the China Securities Regulatory Commission, and did not fully remind investors that the cooperation with Hangshi Fund has not yet reached a binding agreement document, there were significant uncertainties and risks, the relevant disclosure of information was not complete and the risk warnings were insufficient. The former chairman Xuan Ruiguo and secretary of the board Wang Ying bear the main responsibilities for these acts, and received the warning letter from the Guangdong Securities Regulatory Bureau.
It was reported that the company received the "Administrative Penalty Decision" and "Market Prohibition Decision" issued by the Guangdong Securities Regulatory Bureau in May, due to illegal activities such as false reports in annual reports, significant omissions in the disclosure of related-party transactions, and the unauthorized use of non-operating funds by the controlling shareholder and other related parties in the annual reports for the years 2020 and 2021. The Guangdong Securities Regulatory Bureau issued a warning to ST Huatie and imposed a fine of RMB 8 million on the company and its actual controller Xuan Ruiguo.
Currently, ST Huatie is in a trading halt due to its failure to disclose the 2023 annual report and the first quarter report of 2024 on time. Before the suspension, the stock price was 0.79 yuan/share, which was already lower than the delisting threshold of 1 yuan/share. The above statement released by ST Huatie on February 6th may have misled some investors to enter the market.
Recently, many "delisting risk stocks" such as ST Tiancheng (600112.SH), ST Aikang (002610.SZ), ST Kelida (603828.SH), Palm Eco-Town (002431.SZ), and Pengdu Agriculture & Animal Husbandry (002505.SZ) have frequently received warning letters from regulators. The reasons mostly include inaccurate information disclosure, failure to disclose major events in a timely and complete manner, and insufficient disclosure of production operation risks and internal control risks.
For example, the Zhejiang Securities Regulatory Bureau issued a warning letter to ST Aikang this week, stating that on April 15th, the company responded to investors' questions about whether the company has any ST risk on the Shenzhen Stock Exchange's interactive platform, indicating that "the company currently has no ST risk", which did not fully disclose the company's production and operation risks and internal control risks, and the relevant response was inaccurate and incomplete. The former chairman of the company, Zou Chenghui (acting as the secretary of the board), and the director and senior vice president, Tian Ye, received the warning letter because of this.
Similarly, Pengdu Agriculture & Animal Husbandry received a warning letter from the Hunan Securities Regulatory Bureau on May 28th. It was said that the company had issued a correction announcement on that day, stating that there were mistakes in the disclosure of "assets and liabilities measured at fair value", some financial statement item notes, and "related party borrowing", and omitted to disclose "important debt investment at the end of the period" and "risks related to financial instruments". The tea-processing business investment as its main secondary business, focusing on the ecological agriculture industry.
Hunan Securities Regulatory Bureau pointed out that Pengdu Agriculture & Animal Husbandry violated relevant regulations of the "Administration Measures for the Information Disclosure of Listed Companies", and is responsible for the foregoing violations. Tian Yi, the chairman of the company, Gu Qing, the CFO of the company, and Fu Rong, the secretary of the board, were issued warning letters and were also included in the securities and futures market credit files.
In fact, the information disclosure rating of some of the above companies has not been high. For example, ST Huatie, ST Aikang, and Pengdu Agriculture & Animal Husbandry have never received an A-level rating (excellent) since listing. ST Huatie's information disclosure rating for the year 2022 was D (unqualified), and ST Aikang's annual report disclosure rating for the three consecutive years from 2019 to 2022 was D.
It is worth noting that as of now, the above companies have all released risk warning notices that their stocks may be delisted. As of the close of June 7th, the stock prices of ST Tiancheng, Suzhou Kelida Building& Decoration, and Palm Eco-Town Development have fallen below 2 yuan, while the stock prices of ST Aikang, Guangdong Huatie Tongda High-speed Railway Equipment Corporation, and Pengdu Agriculture & Animal Husbandry are all below 1 yuan.
In January of this year, Guo Ruiming, director of the Listing Department of the China Securities Regulatory Commission, said that when speaking about the next steps that the CSRC will take to consolidate and deepen the normalized delisting mechanism, we must resolutely prevent companies and relevant parties from escaping from responsibility. If the company and related parties violate laws and regulations, they should be held accountable, even if the company is delisted. If illegal and irregular behavior causes losses to investors, we will support investors in using various compensation and relief measures provided by the Securities Law to safeguard their own rights and interests. We will also promote the orderly entry of delisted companies into the delisting sector, protecting investors' right to information and trading.
On June 6th, Guo Ruiming answered questions from reporters about the implementation of ST and delisting of listed company stocks, stating that the CSRC attaches great importance to the protection of investors involved in delisting work, insisting on pursuing companies and related parties' illegal and irregular behaviors to the end, cracking down on market manipulation, financial fraud and other behaviors during the delisting process in accordance with the law, and protecting investors' legitimate rights and interests through multiple channels.
So, can investors claim compensation for the 'delisting risk stocks' that have violated the disclosure rules?
Regarding this issue, Wu Sihua, a lawyer from Zhejiang Junan Century Law Firm and an independent director of Zhejiang Jinsheng New Materials, told reporters from Caijing that there is no necessary connection between company being ST or delisted and claiming compensation. If the triggering of delisting conditions is due to poor management and there is no false statement or other securities fraud by any responsible party in the process of information disclosure, the risk should generally be borne by the investors themselves and it may be difficult for investors to claim civil compensation. However, if any responsible party made false statements or committed other illegal acts during this process, the delisting does not affect the right of investors to claim compensation, and eligible investors can still file a claim. It's just that the intensity of the compensation may be different depending on whether the company is still listed or has been delisted.