According to a report on March 11 by Financial Association (Reporter Wu Chao), Hainan Shuangcheng Pharmaceuticals (002693.SZ) announced late last night that its cross-border merger and acquisition, which lasted half a year, had failed. An investor expressed in the stock forum, "Many investors must be asleep, only to find when the sun rises that the sky has fallen."

This deal, once highly anticipated by the market, resulted in Hainan Shuangcheng Pharmaceuticals experiencing a sevenfold surge in price to become the "A-share king" of 2024, but due to losses combined with insufficient annual revenue of less than 0.3 billion yuan after deductions, the company will face delisting risk warnings. After the restructuring fails, the company will once again be confronted with operational difficulties.

It is difficult for the 25 counterparties to reach a consensus.

Hainan Shuangcheng Pharmaceuticals announced late last night that the time and cost differences among the counterparties in obtaining equity in the target company Aola Shares are large, leading to varying expectations for this transaction from the parties involved. After several rounds of negotiations, the company and some counterparties still failed to reach an agreement on transaction pricing and other commercial terms, prompting the company to decide to terminate this restructuring.

Reporters from the Financial Association noted that the 25 counterparties faced by Hainan Shuangcheng Pharmaceuticals have significant differences in their acquisition costs of equity. Among them, entities like Aola Investment and Ningbo Shuangquan are mainly controlled by Wang Chengdong and WANG YINGPU (Wang Yingpu), who are also actual controllers of Hainan Shuangcheng Pharmaceuticals, along with their associate Zhang Liping (Wang Chengdong's wife). Wang Chengdong and his son entered the semiconductor field by acquiring India Aola in 2017, and established Aola Shares in 2018 through the integration of India Aola. Their initial investment amount is difficult to trace, but since India Aola was only engaged in Analog Chip related IP Licensing services at that time, their holding costs may be lower.

Additionally, as Wang Chengdong and his son control 57.51% of Aola Shares, they also pocketed most of the dividend amount of 0.135 billion yuan, decided in November 2020.

In 2021, Aola Shares introduced several investment institutions including Shenzhen Ruizhao, Ningbo Shangchuang, AVIC Trust, Silk Road Huachuang, and Jianggen Capital. By then, it was already approaching Aola Shares' application for the Star board IPO in 2022. It is reported that the valuation of Aola Shares in this round of financing reached as high as 10 billion yuan. The cost pressures on these institutional investors may be relatively high.

From 23 days and 21 boards to a market cap evaporation of 10 billion.

This acquisition began on August 27, 2024, when Hainan Shuangcheng Pharmaceuticals announced a significant asset restructuring and related transactions, intending to purchase all equity of Aola shares through the issuance of shares and cash payments, while also planning to issue shares to no more than 35 specific investors to raise matching funds. Afterwards, the company's Stocks remained suspended until September 10 of that year, when the company released the trading plan. The specific trading price has not been determined, but the price for the shares issued for the acquisition was set at 3.86 yuan per share.

Aola shares have relatively popular Integrated Circuits assets, according to related announcements. In the field of high-performance anti-jitter clock chips, the company is one of the few domestic chip design enterprises that can directly compete with leading Overseas manufacturers, ranking first in domestic market share in this area.

It is worth noting that the issuance price is set at no less than 80% of the average trading price of the Stocks for the 20 trading days prior to the pricing benchmark date; however, in reality, the company's share price had already reacted significantly before the announcement of the restructuring.

On the last trading day before the suspension of Hainan Shuangcheng Pharmaceuticals, the stock volume surged significantly, briefly hitting the daily limit, with a closing price of 5.22 yuan per share, which was 35% higher than the planned price for the Private Placement. Additionally, as early as August 2, the company’s stock had hit the daily limit, and from August 2 to 27, the company's Volume significantly increased compared to previous periods. The announcement of stock price movement released by the company on the evening of September 10, 2024, showed that the company's stock price had increased by 29.19% in the 20 trading days prior to this trading suspension after excluding the impact of Large Cap factors.

After resuming trading on September 11, 2024, the market reacted even more enthusiastically to this restructuring. From September 11 to October 22, in 23 trading days, Hainan Shuangcheng Pharmaceuticals recorded 21 daily limit increases, soaring from 5.22 yuan per share to 40.98 yuan per share, with a cumulative increase of 685% in the Range.

However, this celebration quickly turned into a steep decline, and the company’s stock price fell sharply, dropping to 13.07 yuan per share by the end of January this year, and closing at 13.81 yuan per share on March 10, with a drop of 66% from its peak and a market cap evaporation of over 10 billion yuan.

The main business has encountered difficulties and has hit the red line for (Delisted).

When Ola Co. went public on the Star board, its IPO valuation was about 12 billion. In contrast, Hainan Shuangcheng Pharmaceuticals had a market cap of less than 2.2 billion yuan when initiating the trade last year. The "snake swallowing elephant" trade initiated by Hainan Shuangcheng Pharmaceuticals, with the intention of crossing over into the semiconductor industry, mainly stems from setbacks in its main Business.

Since 2016, Hainan Shuangcheng Pharmaceuticals has reported a net income loss for nine consecutive years after deducting non-recurring items. The 2024 performance forecast indicates a significant price drop for company products following entry into national centralized procurement, along with a decline in sales of products not included in the procurement. At that time, Hainan Shuangcheng Pharmaceuticals stated that the reasons for the restructuring were influenced by various factors such as macroeconomic conditions and industry policies, with intensified market competition in the pharmaceutical industry contributing to a decline in the performance of chemical synthetic peptide drug operations and a certain degree of uncertainty regarding future Business growth.

However, a contradiction arises as Ola Co.'s performance also exhibits severe fluctuations: from 2021 to 2023 and for January to July 2024, the company's net income was -1.096 billion yuan, -0.856 billion yuan, -0.962 billion yuan, and 307 million yuan respectively. Although the first seven months of 2024 saw rapid growth, it heavily relied on licensing clock chip IP to the USA's SiTime, with SiTime paying Ola Co. a fixed consideration of 0.15 billion USD and a variable consideration capped at 0.12 billion USD, raising questions regarding the sustainability of such one-time IP licensing transactions.

After losing the performance gains brought by Ola Co., Hainan Shuangcheng Pharmaceuticals falls into the vortex of a delisting crisis. The company anticipates a net income loss of 55 million to -80 million yuan in 2024, with a revenue of 0.14 billion yuan to 0.18 billion yuan after deductions. With a net income loss and annual revenue of less than 0.3 billion yuan, according to the latest stock listing rules of the Shenzhen Stock Exchange, the company's stocks will face delisting risk warnings, and if the company cannot reverse its operational decline this year, it will face the risk of forced delisting.