Analysis On The Reason,Scheme Selection And Effect Of *ST Stocks’ Active Delisting

Survival of the fittest is the symbol of a mature capital market.In order to solve the problem of low delisting rate in the domestic stock market,relevant departments have opened the curtain of the delisting system’s reform since 2012.Considering that listed companies have the demand of going private,regulatory authorities issued new rules about active delisting.And companies which have the risk of being delisted by exchanges compulsively can take measures to withdraw from exchanges actively before touching to the "red line".In order to speed up the market-clearing,regulatory authorities also gave the actively delisting companies some preferential treatment in relisting procedures.Er zhong(De yang)Heavy Equipment Co.,Ltd had a great deficit from 2011 to 2013 for three years and estimated another loss in 2014,so it would be delisted by Shanghai Stock Exchange.The company urgently took measures to delist actively by acquisition and the vote of shareholders’ meeting.EHEC became the first active delisting company after the reform in2014.The experience of EHEC is of great significance for troubled public company,especially those wearing a "hat".Therefore,this paper takes EHEC as an example to study the reasons,specific plan and effects of active delisting,then provides some suggestions for the *ST stocks,regulatory authorities and so on.This paper believes that delisting actively can prevent *ST stocks’ price from falling sharply,and improve the relisting efficiency.But companies need to pay some costs.Whether*ST shares make an active delisting is based on the comparison of benefits and costs.Those which have a centralized ownership structure,positive business expectations and a certain ability to pay are more likely to delist actively.Why EHEC decided to delist actively was to avoid a sharp decline in share price,protect the interests of shareholders,maintain its market value,and seek preferential policies for relisting in the future when the business expectation was positive and it had a relisting demand.Considering the ownership structure,the payment ability of different subjects and the success’ s probability of different delisting methods,EHEC firstly adopted the method of tender offer.However,the acquisition price would cause minority shareholders a big loss,resulting in the failure of tender offer.In the scheme voted by shareholders’ meeting,EHEC ’s active delisting was not at the cost of minority shareholders bearing losses and giving up future profit opportunities,and shareholders can choose to hold stocks or sale them.Therefore,it won the support of shareholders.After delisting,the stock price of EHEC was stabilized in the short term.In the long term,the operating performance of the company were improved and reached the conditions of relisting.The active delisting procedure is relatively simple which saves time,and reduces the regulatory constraints.At result,it improves the speed and efficiency of EHEC’s reform.From the case of EHEC,we can know that the active delisting of *ST stocks which have the risk of being delisted compulsorily by exchanges can form a win-win situation: for the company,it can avoid a large evaporation of market value at a low cost,and enjoy relisting policy conveniences;for minority shareholders,they can avoid greater investment losses and enjoy the option to hold stocks or liquidate;for regulators,it can speed up market clearing.However,there are also some problems,such as the lack of pricing mechanism for active delisting,insufficient information disclosure,the low participation of minority shareholders,the dereliction of duty of independent directors,and the inadequate audit work of regulatory authorities,which are harmful to the protection of investors’ interests.This paper suggests to establish a pricing mechanism,strengthen the requirements of corporate information disclosure,and enhance the participation of minority shareholders by giving them the right,establishing the feedback mechanism,and setting a "threshold" of minority shareholders attending rates.The supervision department should refine the audit work,pay attention to the information disclosure,the active delisting procedure and the protection of minority shareholders’ interests.Investors should also take an active part in the process and exercise rights reasonably.