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The Hong Kong Stock Exchange's clearing of shell stocks portals to create and sell business may be enlightened by the deconstruction of the bad boys of the DQ stock market

2021-09-01T23:36:46.093Z


In recent years, the Stock Exchange has adopted a number of measures to target penny stocks and staged a "cleansing of peace". The latest move is to raise the threshold for IPOs in an effort to eliminate backdoor listings. As for the listed "shell stocks", life is not easy! Hong Kong Stock Exchange


In recent years, the Stock Exchange has adopted a number of measures to target penny stocks and staged a "cleansing of peace". The latest move is to raise the threshold for IPOs in an effort to eliminate backdoor listings.

As for the listed "shell stocks", life is not easy!

The Hong Kong Stock Exchange revised its listing rules as early as 2019 to increase the period of injecting assets after the purchase of shells to 3 years.

In June of this year, the Founding Group (1609), which had changed hands for three years and had been "over-cold river," planned to sell its original business, but was suddenly questioned by the Stock Exchange of the company's original intention to "backdoor".


One stone caused a thousand waves of waves, and many people in the financial industry felt astonished and "did not understand" the decision of the Stock Exchange.

Li Hualun, the managing director of Yuming Investment, who has dealt with many "difficult and complicated cases" in the financial industry, personally deconstructed the rationale behind the Stock Exchange and even the enlightenment of the incident to "Hong Kong 01".


In recent years, the Hong Kong Stock Exchange has increasingly regulated penny stocks, and it is still the hottest not to be able to sell the original business for three years.

(Profile picture)

The living space of "shell stocks" has once again attracted widespread attention following the destiny of Chuanghe Group.

The stock plunged 85% in a single day at the beginning of June, and it is still hovering at a low level. The reason behind this is that the stock exchange has a rare "bright sword". According to Rule 14.06 of the Listing Rules, it questioned the company’s "backdoor" listing, saying that although it was founded in the past 36 months There was no change in control, but the main business expanded to new energy vehicles and logistics and financial leasing during the period.

In January of this year, the majority shareholder of the Founding Group announced the sale of concrete pouring and other ancillary services three years after it took over. The Stock Exchange stated that this series of actions had a "backdoor" listing intention. "The sale is part of a series of transactions and arrangements. It is an attempt to achieve the listing of new energy vehicles and logistics and financial leasing businesses, and to circumvent the new listing requirements in Chapter 8 of the Listing Rules."

Severely cracked down to create listing rules 14.06 "spicy"

After 36 months of "cold river," the company sold the company, but failed to turn around freely. Instead, the Stock Exchange was recruited, and many market participants were caught off guard.

Li Hualun (Warren), the managing director of Yuming Investment, who has been in the financial industry for many years and has a good knowledge of the listing rules, interprets Article 14.06 of the listing rules to the reporter of "Hong Kong 01".

Li Hualun personally resolved Rule 14.06 of the Listing Rules, subdivided into reverse takeover actions and sales restrictions.

(Photo by Ou Jiale)

He pointed out that Article 14.06 is still subdivided into reverse takeover actions and sales restrictions. Among them, the familiar "no business for sale within 3 years" originated from 14.06E.

"Three things can't happen within 36 months, otherwise it will be RTO (reverse acquisition and listing), the first series will be transferred to major shareholders or directors, the second series will be transferred to the business, and the third series will sell the original business."

But it turns out that 14.06B is more "hot", "As long as there is a major change in the business of a listed company, you have the right to be an RTO. The focus is no time limit!" With the intention of new listing, they have the right to sell "DQ" listed companies.

Therefore, even though the establishment did not sell its original decoration and concrete pouring business three years after its ownership, the Stock Exchange can still question its "listing intention" and propose "DQ" its listing status in accordance with Article 14.06B.

Transformation of penny stocks has become more difficult

Taking into account the latest "remarks", the Hong Kong Stock Exchange has adopted a number of "relentless measures" against shell stocks in recent years, including increasing the period of asset injection to three years after buying the shell; and prohibiting issuers from issuing large-scale securities in exchange for cash for acquisition or Develop new businesses that are much larger than the existing main business; and tighten the compliance regulations for reverse takeovers and extreme transactions.

Li Hualun said bluntly that under the current supervision of the Hong Kong Stock Exchange, penny stocks are "basically impossible to restructure!" He continued, if they really want to restructure, they must slowly change in their own business. It can be used as a hotel, or even a multi-storey building can be rented out, but if a hotel suddenly changes to technology, it won’t be possible!"

Evergrande Automobile (0708) was formerly known as Evergrande Health, and its predecessor was Yang Shoucheng's New Media.

(Visual China)

Having said that, the market hears examples of company transformation from time to time.

Take the Evergrande department, which has been in the focus of the media recently, as an example. Evergrande Automobile (0708) was formerly known as Evergrande Health. The business entered the automotive business, and the transformation process did not see major twists and turns.

Li Hualun pointed out that the scale of the business needs to be changed. "Isn't it possible to switch to a large company? For example, if I (business) earns tens of millions of yuan, the scale is so large that my business is enough to be listed. If it happens, you don’t want to sell shells. (The Stock Exchange) I don’t want you to sell shells, but the family will sell shells as soon as a legal system company transforms."

And the key point is to sell the business. "Selling is the most difficult thing. Selling the original business is a deadly disease. I think you will be the business "as soon as you are born." ".

"Victoria Park Brother" Ren Liangxian is now fully engaged in financial work, operating its one-stop financial platform consulting company Ayasa.

(Photo by Ou Jiale)

Someone said the acquisition process was "very complicated"

The management of a listed company with a small scale has also recently revealed to reporters the twists and turns of the "transformation" process.

Ren Liangxian, who has faded out of the political arena and was once known as "The Victoria Park Brother", graduated from the Department of Finance and Economics of the University of Illinois in the United States

.

Future Development (1259) spent 42 million yuan last year to acquire 60% of the shares in Ayasa Globo, but Ren Liangxian bluntly said that the acquisition process was very complicated. Originally it was only a transaction that needed to be disclosed, but in the end it became subject to approval...” He bluntly said that the question asked by the Stock Exchange was “inexplicable”, “how to guarantee business prospects, how to guarantee profitability, the company’s financial status, and the company’s top five customer information Wait, in the final stage, I was asked about my personal financial situation, as if I was going to the bank to borrow money!"

He described that the question asked by the Stock Exchange was "exceeding imagination." When asked what he thought his personal financial situation had to do with the company's business

,

he smiled and said, "Maybe I'm afraid that the company won't want us to use water in the future! In fact, entrepreneurs may not be necessary. There are so many tangible assets, and you have to press down the floor, and you need proof of assets to fulfill my profit guarantee."

The Stock Exchange asked him about Ayasa's financial situation regarding its merger into a listed company.

(Photo by Ou Jiale)

Restricted selling old business "No Commercial Sense"

The Hong Kong Stock Exchange has become more and more stringent in its supervision of penny stocks. Raising the threshold for listing is like closing the gate to the front door. Increasing the supervision of mergers and acquisitions will make it more difficult for penny stocks that have entered the market to turn around.

However, three feet of ice is not a day's cold.

The Stock Exchange has become more strict with penny stocks in recent years. This is because many companies have gone through "backdoor" listings, which have led to chaotic speculation.

In 2014, shell stocks were in power. Every time you sold shells, you could earn 400 to 500 million yuan. The shell stock market flourished for a while, and many retail investors were "cut leek" tragedies.

After that, the authorities began to tighten supervision of shell stocks, and the penny stock market immediately fell silent.

According to the US Securities and Exchange Commission (SEC) classification of stocks, the market value of less than US$50 million (389 million) is Nano Cap, and the market value of US$50 million to US$300 million (389 million to 2.334 billion) is micro-cap. (Micro Cap).

As of 2020, there are 969 listed companies with a total market value of less than 389 million yuan in Hong Kong, and 773 listed companies with a market value of between 389 million yuan and 2.334 billion yuan, accounting for more than 68% of the total number of Hong Kong stocks.

Some companies failed to achieve profitability in the short-term, so they went public through "buying shells" in the early years.

(Profile picture)

A senior person familiar with the penny stock market said that due to the supervision of the Hong Kong Stock Exchange and the difficulty of mainland funds coming to Hong Kong, shell stock trading is indeed "faster than before." Many mainlanders want to buy, so some people have done it before. However, there are times when the company does not go to the (market), and the business has a time limit. You have to wait a few years to make money first. Development and waiting for money, the only way to buy shells."

He cited aerospace technology (1725) as an example. He pointed out that aerospace technology cannot make money overnight, but the business has development potential.

Aerospace Technology was originally called Hengda Technology. It was originally engaged in electronics manufacturing services, involving assembly and production of printed circuit board assembly, etc. The business lacks imagination.

As of April this year, after Hengda Technology sold its business to Wen Yichuan, the company changed its name to Hong Kong Aerospace Science and Technology. Emerging concepts.

In fact, many small market capitalization stocks have become "zombie stocks" due to dull business, but they are facing obstacles to transformation, especially the companies are not allowed to sell their businesses.

The above-mentioned market participants continued: "Some industries are slowly being eliminated by the market, and some industries were previously unavailable. You don't want the company to throw away the old business that is not making money. This matter is not a commercial sense. Wang Weiyi himself engages in broadband. After that, I will be engaged in TV and then in e-commerce. Don’t you just switch? Cheung Kong started to make plastic flowers, but the family didn’t only engage in real estate!"

Li Hualun believes that the company's disclosure of sufficient information is most important to investors.

(Photo by Ou Jiale)

However, Li Hualun was also "rehabilitated" by the Stock Exchange. He pointed out that under the current regulations, as long as the listed company is not "changing", the Stock Exchange is relatively loose. I would ask me, I bought a securities firm at the beginning of the year, and I asked every question. The business was reasonable expansion (expansion). But Yu Ming bought a car company or a car rental company.

Regarding whether the Hong Kong Stock Exchange's approach is too tight, he said that it is difficult to comment, saying only that "the Hong Kong Stock Exchange must follow the rules if it is successful."

However, he couldn't help but speak up for retail investors, "A lot of retail investors like to play penny stocks. The most important listed company has no big talk, and some have not disclosed enough. Will be pulled!"

Source: hk1

All news articles on 2021-09-01

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