90,000 investors were cheated by the "first blockchain stock" which had a revenue fraud of more than 50 billion yuan over 6 years.

Just as six companies announced their delisting, another group of companies received delisting decisions from the exchange.

On the evening of May 18, *ST Huaxun and *ST Yijian announced that the company had received a decision from the exchange to terminate the listing of its shares. The company's shares will enter the delisting period from May 26. The delisting period is 15 trading days, and the expected last trading date is June 16. As of March 31, 2022, the two companies have nearly 90,000 shareholder households.

This year is the second year of the implementation of the new delisting rules, and it is also the year when the reform effects are concentrated. After the disclosure of the 2021 annual reports, more than 40 companies in the Shanghai and Shenzhen stock markets have been forced to delist, setting a new record for A-shares. More than 90% of them have been delisted due to financial reasons. In addition to the delisted *ST Aige and delisted Xinyi, there are currently 5 companies in the delisting consolidation period, and 2 companies have completed the delisting consolidation period and are waiting for the exchange to delist.

In addition to the above-mentioned companies that have been sentenced to delisting, there are a number of companies that are waiting for a verdict on whether to terminate their listing. According to incomplete statistics from Securities Times reporters, 25 companies have received advance notices from exchanges on the proposed termination of their listing.

Two more companies were forced to delist

On the evening of May 18, *ST Huaxun announced that the company received the Shenzhen Stock Exchange's "Decision on the Termination of Listing of Huaxun Ark Co., Ltd.'s Shares". The Shenzhen Stock Exchange decided to terminate the company's stock listing.

*ST Huaxun’s 2020 annual financial accounting report was issued with an audit report that could not express an opinion because its audited net profit was negative, its operating income was less than 100 million yuan, and its audited net assets at the end of the period were negative. The company’s stock trading has been subject to a delisting risk warning since April 30, 2021.

On April 28 this year, the first annual report (i.e. the 2021 annual report) after the delisting risk warning was implemented for *ST Huaxun’s stock trading showed that the company’s audited net profit in 2021 was -719 million yuan, its operating income was 35 million yuan, and its audited net assets at the end of the period were -2.132 billion yuan. The 2021 annual financial accounting report was issued with an audit report that could not express an opinion, which triggered the circumstances for the termination of stock listing stipulated by the Shenzhen Stock Exchange.

Shenzhen Stock Exchange decided to terminate the listing of *ST Huaxun's shares. The company's shares entered the delisting period from May 26, and the exchange will delist the company's shares on the next trading day after the expiration of the delisting period. As of the end of the first quarter of this year, the company had more than 45,000 shareholders.

Coincidentally, *ST Yijian was also forced to delist along with *ST Huaxun. On the evening of May 18, *ST Yijian announced that the company had received the "Decision on Termination of Listing of Yijian Supply Chain Management Co., Ltd.'s Shares" from the Shanghai Stock Exchange, and the Shanghai Stock Exchange decided to terminate the company's stock listing.

*ST Yijian's stock has been under a delisting risk warning since July 7, 2021, due to the negative audited net assets at the end of 2020 and the issuance of an audit report with no opinion on the financial accounting report. On April 27, 2022, the company disclosed its 2021 annual report, and the audited net assets at the end of 2021 were -4.972 billion yuan. Dahua Certified Public Accountants (Special General Partnership) issued an audit report with no opinion on the company's 2021 financial accounting report. The above circumstances trigger the termination of the listing of stocks.

The Shanghai Stock Exchange has decided to terminate the listing of *ST Yijian shares. The company's shares will enter the delisting settlement period starting on May 26. The delisting settlement period will be fifteen trading days, and the last trading day is expected to be June 16.

The "first blockchain stock" has faked revenue of more than 50 billion in 6 years

In addition to financial delisting circumstances, *ST Yijian also faces forced delisting circumstances due to major violations.

On the evening of April 19, *ST Yijian announced that the company had received the "Administrative Penalty Advance Notice" issued by the China Securities Regulatory Commission. The company's suspected illegal facts are: false records and major omissions in the periodic reports from 2015 to 2020; and failure to disclose the 2020 annual report on schedule.

The "Notice" shows that from 2015 to 2020, the company's false revenue in each year was RMB 4.441 billion, RMB 11.92 billion, RMB 12.004 billion, RMB 10.47 billion, RMB 10.987 billion and RMB 6.429 billion, respectively, accounting for 84.26%, 73.68%, 75.20%, 72.18%, 71.59% and 66.16% of the total operating revenue disclosed in each year, respectively. The total falsely inflated revenue in six years was RMB 56.251 billion.

The inflated profits in each year were RMB 43 million, RMB 684 million, RMB 1.147 billion, RMB 1.121 billion, RMB 1.24 billion, and RMB 3.975 billion, respectively (taking into account the bad debt provisions set aside by Yijian Co., Ltd. in 2020), accounting for 9.49%, 69.33%, 96.46%, 110.06%, 142.94%, and 33.07% of the total profits disclosed in each year, respectively. The inflated profits were RMB 8.212 billion in 6 years; after deducting the inflated profits, the company suffered losses for three consecutive years from 2018 to 2020.

The company stated that it is currently verifying the suspected illegal facts and financial data in the "Notice". It is expected that the company's net profit attributable to shareholders of the parent company from 2016 to 2020 will be negative, which may trigger a major violation and delisting situation. The company will make retroactive adjustments to the financial statements from 2015 to 2020 as soon as possible.

*ST Yijian also violated the law by failing to disclose its 2020 annual report in a timely manner. On April 30, 2021, Yijian announced that the company could not disclose the audited 2020 annual report within the statutory period, and the company's stock would be suspended from May 6, 2021. On July 6, 2021, Yijian disclosed its 2020 annual report.

In addition, *ST Yijian failed to truthfully disclose the actual controller in its annual reports from 2015 to 2018. From 2015 to September 2018 and from October 2018 to December 2018, the controlling shareholder of Yijian was Jiutian Group, and the actual controller was Leng Tianqing. Yijian failed to truthfully disclose the actual controller.

*ST Yijian was once known as the "first blockchain stock" in the A-share market. Yijian Co., Ltd. was formerly known as "Hejia Co., Ltd." and was formerly the Sichuan listed company Hejia Co., Ltd., which was listed in 1997. In 2016, Hejia Co., Ltd. started its blockchain business and announced a partnership with IBM to jointly develop the "Yijian Blockchain System 1.0" system. In this process, IBM provided an enterprise-level blockchain platform based on Hyperledger Fabric. Since 2017, Hejia Co., Ltd.'s main business has been supply chain management and commercial factoring. In order to reflect the company's industry and development needs, Hejia Co., Ltd. was renamed Yijian Co., Ltd. in April of the same year. Subsequently, Yijian Co., Ltd. also became famous in the market and became the "first blockchain stock in the A-share market."

As of the latest, the closing price of *ST Yijian's stock is 0.78 yuan per share, which has fallen by 97% from the company's historical high. As of the end of the first quarter, the company had nearly 44,000 shareholders.

*ST Huaxun was investigated by the China Securities Regulatory Commission

On the eve of the exchange's delisting decision, *ST Huaxun was also investigated by the China Securities Regulatory Commission.

On the evening of May 9, *ST Huaxun announced that the company received the "Notice of Case Filing" from the China Securities Regulatory Commission on May 9, 2022. Because the company was suspected of violating laws and regulations on information disclosure, in accordance with relevant laws and regulations, the China Securities Regulatory Commission decided to file a case against the company.

The specific reasons for the investigation by the CSRC are still unknown. However, *ST Huaxun had many suspicious operations before, including the court's rejection of its reorganization application, its inclusion in the list of dishonest persons subject to enforcement, its shareholders' massive share reduction, the difficulty in producing audit reports, and the change of annual audit accounting firms.

*ST Huaxun has been included in the list of dishonest persons subject to enforcement. Due to insufficient liquidity, *ST Huaxun failed to fulfill its repayment obligations stipulated in the effective legal documents within the time limit. On April 26 this year, *ST Huaxun was newly included in the list. In addition, *ST Huaxun is in a difficult predicament of high debt and shortage of funds. At the same time, *ST Huaxun's bankruptcy reorganization has not been accepted by the court, and the main bank accounts have been sealed and frozen due to the debt overdue lawsuit.

When a listed company is sentenced to delisting, the major shareholders will also have a hard time. According to the announcement of *ST Huaxun, some of the shares of *ST Huaxun held by Huaxun Ark Technology Co., Ltd. will be auctioned for the first time. The number of shares auctioned is 125.69 million shares, accounting for 55.69% of the company's shares held by it and 16.41% of the company's total share capital. If the above-mentioned public auction of shares is finally completed, it may cause changes in the company's controlling shareholder and actual controller. At present, the auction is still in the public announcement stage.

There are 25 companies waiting for judgment

2021 is the first year for the implementation of the new delisting rules. According to incomplete statistics from Securities Times reporters, more than 40 A-share companies will be delisted this year. Data released by the Shenzhen Stock Exchange showed that 24 companies have touched the delisting red line in 2022, a record high. Among them, 8 companies have touched the "operating income less than 100 million yuan + negative net profit" indicator, and the new delisting rules have shown their effectiveness.

According to the data from the Shanghai Stock Exchange, 21 companies are expected to be delisted so far. Among them, 17 companies are expected to be delisted due to financial delisting indicators, and 9 of them are expected to be delisted due to the combination of financial indicators of "net profit after deducting non-recurring items + operating income". In addition, Xinyi was delisted due to major violations of the law, and three other companies, including Andeli and *ST Guangzhu, exited through diversified channels such as restructuring and voluntary delisting.

At present, *ST Aige and Delisted Xinyi have been delisted and withdrawn from the A-share market; Delisted Zhongxin and Delisted Lasha have completed the delisting consolidation period and are waiting to be delisted; five companies, Dedian Delisted, Changdong Delisted, Deao Delisted, Delisted Xishui and Delisted Luting, are in the delisting consolidation period.

In addition to the companies that have already announced their delisting, according to incomplete statistics from Securities Times reporters, there are currently 25 companies that have received prior notice of delisting from the exchange, including *ST Bangxun, *ST King Kong, *ST Mengshi, *ST Chenxin, *ST Danbang, *ST Dewei, *ST Shenglai, *ST Contemporary, *ST Baode, *ST Tianshou, *ST Cody, *ST Xinguang, *ST Lvjing, *ST Donghai A, *ST Xiahua, *ST Jitang, *ST Zhongying, *ST Haiyi, *ST Shuzhi, *ST Global, *ST Wangli, *ST Julong, *ST Jintai, *ST Tengbang, and *ST Haichuang.

Most of the above companies are in financial delisting situations and are currently waiting for the exchange to decide whether to terminate their listing. Cheng Xiang, a strategic analyst at Shenwan Hongyuan Securities, believes that overall, the number of companies forced to delist this year has reached a record high, a normalized delisting mechanism is taking shape, and the concept of "all companies that should be delisted should be delisted" is gradually being fully recognized. A new market ecology with both inflows and outflows and the survival of the fittest is gradually being built. The new delisting rules will have a deterrent effect on listed companies, helping to encourage them to adjust their business strategies in a timely manner and achieve stable operations. Overall, the new delisting rules have achieved good results after implementation, further purifying the capital market environment.