How can B-share companies do to relist their stocks?
It aroused wide concern of market participants and all walks of life that some B-share companies were recently confronted with delisting for meeting non-financial indicators. Concerning such kind of questions, the Shenzhen Stock Exchange and the Shanghai Stock Exchange (SSE) successively responded to them through answers to reporters' request. The two exchanges' attitude towards the questions was as follows. Firstly, B shares meeting delisting indicators shall be delisted according to law. Secondly, B-share companies are encouraged to keep listing their stocks in a legal way. Thirdly, the B-share companies meeting relisting requirements after voluntary delisting will be arranged for relisting according to historical factors and their demands.
However, the same attitude the two exchanges took caught the public imagination. From yesterday, the relisting of B-share companies kept being discussed and analyzed regarding where to relist, the relisting requirements, how to meet the requirements, how to do stock trading after relisting and other issues.
As for the above questions, Shanghai-based journalists from China Securities Journal, Shanghai Securities News, and Securities Times jointly interviewed some experts in the industry yesterday.
Feasible Alternatives: Issuing Only A Shares or H Shares
“Under the present circumstances, it is feasible that B-share companies delisting their stocks for having met non-financial indicators can only apply for relisting on the A-share market to the exchanges or relist their stocks overseas through issuance of H shares if they basically meet the relisting requirements,” said Senior Economist Lin Caiyi of Guotai Junan Securities Co., Ltd. Lin pointed out it was incorrect that someone held the companies had no choice to relist their stocks on the A-share market after delisting their stocks on the B-share market because there were many legal barriers to change B shares as foreign shares into A shares in the practice. According to Lin, on one hand, the specific historical conditions for the establishment of the B-share market make it impossible for B-share companies to relist their stocks on the B-share market. The B-share market was developed as China lacked of channels for foreign investment at that time and overseas investors had large demands for the shares in domestic companies. Obviously, this factor becomes invalid now. On the other hand, the demands of companies and investors should be taken into consideration. At present, with the inactive stock trading, the shortage in financing functions and the devaluation of stock prices, the companies having voluntarily delisted their stocks on the B-share market are surely unwilling to relist their stocks there, and otherwise they would have not voluntarily delisted their stocks. Besides, B-share investors don't expect the companies whose shares are held by them to relist on the B-share market, either. Moreover, technically there are no substantial legal barriers for B-share companies to relist on the A-share or H-share market after delisting.
Priority and Privilege Given to Relisting
From the same attitude of the two exchanges towards the requirements and procedures for B-share companies to relist on the A-share market after voluntary delisting, experts estimated that there was a clear tendency to priority and privilege. Li Xunlei, Vice President and Chief Economist of Haitong Securities Company Limited, said that as clearly stated by the two exchanges in the answers to journalists' questions, B-share companies would be arranged for relisting based on historical factors and their demands. According to Li, the exchanges' statements revealed the following points. Firstly, B-share companies can directly apply for relisting to the relevant exchange and will relist upon examination and approval by the Listing Committees of the two exchanges with no need for the approval of the China Securities Regulatory Commission. Therefore, the procedure for relisting will be simplified. Secondly, as regards historical factors, it may mean that the exchanges will give priority to B-share companies for relisting A shares and the companies not meeting the relisting requirements for financial indicators may apply for exemption. Li summarized that apart from the simplified procedures for relisting, market participants should attach importance to the exchanges' statements of historical factors which implied priority queue and lowered requirements.
Targeted Capital Increase: A Feasible Way for Assets Restructuring
Lawyer Lu Hongbing, Chief Executive Partner of Grandall Law Firm, said that after voluntary delisting, B-share companies do need to improve their fundamentals and enhance their investment values so that they could re-meet the requirements for listing as mentioned by the exchanges. In the above process, it is necessary to positively conduct assets restructuring, while a feasible way is targeted capital increase. “Like the A-share market, the B-share market could usher in not more than 10 domestic institutions as strategic investors, who could inject quality assets, and RMB or foreign currency funds,” said Lu.
Moreover, concerning foreign shareholders' trading in the A-share market after B-share companies are relisted on the A-share market, Lu pointed out that the problem could be solved through the QFII mechanism. Actually, the existing A-share companies have a lot of overseas shareholders, so their practices could provide valuable references for the foreign shareholders of relisted B-share companies.
FTSE Mondo Visione Exchanges Index:
Shanghai Stock Exchange: Possible Ways For Relisting Of B-Share Companies
Date 09/08/2012