The first delisting company to relist A shares since the implementation of the new regulations——

  Capital market can enter and exit, accelerate the formation of ecology

  Our reporter Li Hualin

  Recently, Huilv Ecological Technology Group Co., Ltd., which has been away from A-shares for many years, relisted on the Shenzhen Stock Exchange, becoming the first company to relist since the implementation of the new delisting regulations.

  Experts said that Huilv's return to A-shares has released a positive signal from the regulatory authorities to encourage high-quality companies to go public, which is conducive to the formation of a benign capital market ecology of "both up and down" and "advancing and retreating".

At the same time, in order to avoid the use of institutional arbitrage by enterprises, the market suggests that in the future, it is necessary to further strengthen supervision and improve relevant mechanisms to better protect the interests of investors.

  Encourage companies to revive

  Many investors may be relatively unfamiliar with Huilv Eco, because it has left the A-share market for 16 years.

  Public information shows that Huilv Eco was formerly known as Wuhan Liuduqiao Department Store. It was established in 1990 and listed on the Shenzhen Stock Exchange in November 1997.

Due to losses for three consecutive years, the company's stocks were suspended from listing at the end of March 2004 and terminated at the beginning of July 2005.

In 2014, the company implemented bankruptcy and reorganization, and implemented and completed the reorganization plan in May 2016. The company's main business was changed to garden engineering construction, garden landscape design, and seedling planting.

  On June 19, 2019, Huilv Ecology submitted a relisting application to the Shenzhen Stock Exchange, and the Shenzhen Stock Exchange initiated the acceptance and review work in strict accordance with laws and regulations.

On August 20, 2021, the Shenzhen Stock Exchange made a decision to approve the re-listing of the company's shares in accordance with relevant regulations and the review opinions of the Listing Committee.

  "The successful listing of Huilv Ecosystem has brought hope to other companies that have delisted due to losses." said Yang Delong, chief economist of Qianhai Kaiyuan Fund. The company's operating capabilities have improved substantially and meet the relevant requirements. The market will still give the company a chance to reform and renew, which is conducive to safeguarding the interests of small and medium shareholders, so that the original small and medium shareholders will still have the opportunity to share the results of transformation and development with the company.

  The re-listing system is the highlight of the reform of the delisting system in 2012. Its goal is to establish a market mechanism that "can enter and exit" to provide delisted companies with a path to re-listing after significant improvements in their sustainability and corporate governance.

After the delisting of Huilv Ecological, the company’s capital structure was improved through bankruptcy reorganization, two major asset reorganizations, and equity split reforms. The debt scale was reduced. In the past three years, the company’s main business operations have been stable and its operating capabilities have been significantly improved.

From 2018 to 2020, the company achieved net profits of 80,949,200 yuan, 82,755,400 yuan, and 86,789,100 yuan; operating income of 741 million yuan, 769 million yuan, and 814 million yuan.

  "There will be ups and downs and mistakes in the process of corporate growth. Delisting should not be the end of the development of the corporate capital market, but can be an opportunity for corporate reform." Tian Lihui, Dean of the Financial Development Research Institute of Nankai University, said that the company has undergone reform and development. Going public after meeting the relevant requirements is not only the result of hard work, but also an opportunity to start anew.

At the same time, it is also an important manifestation of the increasing inclusiveness of the A-share market, the survival of the fittest, and the accelerated formation of a virtuous ecosystem of “advance and retreat”.

  Relisting is not easy

  Some voices in the market also expressed concern about the re-listing of delisted companies.

  "If a company has the ability to go public, but does not go through the IPO channel but has to spend higher costs to relist through reorganization, will there be arbitrage by the system?" said Dong Dengxin, director of the Institute of Financial Securities at Wuhan University of Science and Technology.

In addition, the company can "live and resurrect" after delisting, and investors may no longer worry about the company's delisting when making investment decisions. This may stimulate the market to speculate and the trend of speculation will rise.

  There is also a view that the re-listing system is tantamount to leaving a tail for delisted companies, which can be revived at any time, which may give birth to more "phoenix" companies.

  However, more experts said that relisting is an important way to clear the delisting channels and ease the pressure of delisting. After years of practice, a relatively complete system design and supervision arrangements have been put in place, so there is no need to worry too much about the occurrence of the above situation.

  "The companies that relisted as required by the rules are new-born companies, not the original inferior companies, nor are they zombie companies. The "phoenix" also distinguishes between the "phoenix bird" and the "zombie bird", and the company that meets the standard and then relists It can be the "Phoenix Bird" of Nirvana." Tian Lihui believes that after the delisting of Huilv Ecosystem, through its own efforts to improve its governance structure, enhance its ability to continue operations, and have the conditions for relisting, this is an attempt to pass some of the main businesses that are not prominent and hollow. It cannot be copied by companies returning to A shares by means of changing the actual controller.

  Yang Delong also believes that since the implementation of the new securities law, the regulatory authorities have severely cracked down on market manipulation and insider trading, and resolutely curbed market speculation, speculation, and speculation in new phenomena. It is difficult for the speculation of junk stocks to occur.

  In fact, the threshold for re-listing is not low.

According to relevant regulations, the re-listing of delisted companies needs to meet conditions such as shareholding structure, financial indicators, sustainability, and compliance requirements.

The main indicators such as net profit are basically the same as those of the IPO. For example, they all require that the net profit of the most recent three fiscal years is positive and the cumulative total exceeds 30 million yuan.

  In addition, if a company is forced to terminate the listing of its shares due to a fraudulent issuance and compulsory delisting, it shall not apply for relisting; the application time for other compulsory termination of listing companies must meet the prescribed interval requirements.

It can be seen that relisting of delisted companies is not an easy task. At present, only Huilv Eco, Changhang Oil Transportation (currently known as "China Merchants Nanyou") and Sinomach Heavy Equipment have succeeded.

  "The re-listing system arrangement is designed to support delisted companies to resume their sustainable operations, improve their governance structure, and return to the A-share market after meeting relevant standards." For companies whose main business is not prominent, governance is imperfect, and their operations are not standardized, the Shenzhen Stock Exchange will strictly control the “entry gate” of the market, and will not accept or approve their relisting in accordance with laws and regulations.

  Investment requires rational decision

  Since the implementation of the new delisting regulations, diversified delisting channels have become increasingly smooth, and the number of delisting companies has increased significantly.

The reporter combed and found that since this year, more than 20 companies have delisted or triggered delisting conditions.

  "With the advancement of the new delisting regulations, more companies will be delisted in the future, and more companies will need to relist. It is necessary to strengthen supervision and inspection, and strictly review the company's application materials to ensure the quality and legal compliance of the re-listed company." Yang Delong said.

  According to current regulations, the relisting of delisted companies shall be reviewed by the Exchange in accordance with the regulations, and after deliberation by the Listing Committee, a decision on whether to approve their relisting shall be made and reported to the China Securities Regulatory Commission for the record.

Compared with IPO listing, the lack of approval or registration by the Securities Regulatory Commission can also avoid the queuing of IPO channels.

"In the future, we can consider including the re-listing into the IPO channel and follow a unified review and registration process to further ensure fair listing." Dong Dengxin suggested.

  For investors, perhaps more concerned is whether the re-listed stocks have investment value?

  Let’s take a look at the performance of Huilu Eco after its listing. On November 17, the stock price of Huilu Eco went up 122% on the first day of its re-listing.

  Looking at the previously listed Changjiang Airlines and Sinomach Heavy Equipment, the overall performance is not satisfactory.

Changhang Oil Transport re-listed on January 8, 2019. After hitting the highest re-listing price of RMB 5.49 in April of that year, it began to decline. As of November 23 this year, the closing price was reported at RMB 1.95.

SINOMACH re-listed on June 8, 2020, and reached the "peak" price of 9.59 yuan on the first day of listing, and then began to decline, as of November 23 this year, the closing price was 3.27 yuan.

  "Re-listed stocks are equivalent to rebirth stocks. Investors can pay attention, but they must make rational investments." Tian Lihui said that at present, for "resurrection stocks", the market is still in an adaptation stage, and short-term stock prices may fluctuate greatly. Related companies The real value has yet to be released. Investors should treat relisted stocks with a calm mind, and invest cautiously in accordance with the company's comprehensive judgment on fundamentals.

  Earlier, the Shenzhen Stock Exchange reminded the risks of Huilu’s ecological operation, saying that Huilu Eco also has industry risk factors that require attention, such as high account receivable balances and large income volatility, and expressed that investors are invited to be serious. Read the company's re-listing report, re-listing sponsorship and other announcement documents to fully understand the company's main risks at the macro and micro levels, participate in transactions rationally and compliantly, and avoid blindly following the trend and speculation.