SHANGHAI, March 20 |
SHANGHAI, March 20 (Reuters) – China’s stock exchanges
should make it easier for companies to be de-listed and crack
down on the use of shell companies for “backdoor” listings, a
Shanghai Stock Exchange official wrote in an article published
in official media on Tuesday.
Exchanges should move away from their current over-reliance
on a single criterion for delisting – three straight years of
operating losses – and develop multiple new criteria for
de-listing, Shang Zheng wrote in the official China Securities
Journal as part of its ongoing investor education and protection
series. Shang’s title was not identified.
New rules on de-listing appear to be part of a broader
campaign by Guo Shuqing, the new head of China’s securities
regulator, to clean up the country’s exchanges
Shang added that new de-listing criteria should be based on
indicators such as the transaction volume of company shares; the
market value of the company based on its share value; net
assets; and income from the company’s main business.
Different boards should develop differentiated de-listing
standards, he added.
The article pointed out that only 70 companies had been
delisted since 2001, of which 49 were de-listed for negative
profits and 21 due to mergers and acquisitions.
Shanghai’s exchanges should also crack down on “backdoor”
listings involving the acquisition of a listed shell company by
an unlisted firm.
If a listed company has its name changed and is
re-structured beyond all recognition, it should not be
considered the same company, the article said. And if an
unlisted company wants to list, it must go through the standard
approval process.
The practice is also a main reason why so few companies have
actually been de-listed, Shang said. The practice of backdoor
listings has led to speculation on the stocks of weak companies,
based on the expectation that the company may be acquired and
re-structured by an unlisted company.
The China Securities Regulatory Commission (CSRC), which
governs the exchanges, has revealed plans to tighten regulations
on insider trading, IPO pricing, and temporary suspensions of
share trading based on unusual price movements.
In January, CSRC’s Guo established a new “investor
protection bureau” within the commission.
(Reporting by Gabriel Wildau; Editing by Jacqueline Wong)