How Far Is Henan Diamond From Compulsory Delisting? Financial Data Facing Retroactive Adjustment

        On August 17, the stock price of * ST diamond (i.e. Yu diamond, 300064. SZ) rose rapidly after opening at a low price. In the sound of market crash, it closed against the market and rose 0.48%.

As a venture enterprise which has just been issued the notice of administrative punishment and market entry Prohibition (hereinafter referred to as the notification), this quotation of * ST King Kong is nothing more than a shot in the fire.

According to the notice on administrative punishment and market ban issued by the CSRC, yudiamond is suspected of providing funds to the actual controller and its related parties through fictitious sales and equity transfer transactions, fictitious procurement transactions, fictitious procurement business, payment of purchase funds, off account loans and commercial bills, Failing to disclose the six major violations of laws and regulations, such as related party transactions involving non operating funds.

According to the announcement, the net assets of * ST King Kong increased by 1.856 billion yuan at the end of 2019. The annual report shows that the net assets of the company on December 31, 2019 is 1.721 billion yuan, and the loss in 2020 is 1.236 billion yuan. The net assets after retroactive adjustment on December 31, 2019 and December 31, 2020 may be negative, which may touch the situation of compulsory delisting in violation of the law.

With the implementation of the punishment decision, * ST King Kong's investor litigation is on the way.

Wu Feng, the founding partner of Beijing Langcheng law firm, pointed out to reporters: "the notice on the punishment of Yu diamond has just been disclosed. At present, we have not received any claim registration from investors, but there will certainly be cases in the future. The situation of Yu diamond conforms to the provisions of the Supreme People's Court on the judicial interpretation of civil compensation for false statements in the securities market, Qualified investors can claim legal liability from the listed company and its executives, and according to the relevant provisions of the exchange's compulsory delisting, it does not exclude that the company will be forced to delist, but this does not affect investors' claims. "

How far is Henan diamond from delisting?

After 16 months of investigation, it has become clear that Yu diamond has violated the rules and financial fraud.

According to the notification, Yu diamond is suspected of illegal facts such as fictitious sales and equity transfer transactions, false increase of business income and total profit, and non operating occupation of related parties.

Specific behaviors include: Yu diamond is suspected of falsely increasing business income and total profit through fictitious sales transaction and equity transfer transaction, resulting in false records in the annual report from 2017 to 2019. From 2017 to 2019, the company falsely increased business income by 88.1643 million yuan, 104 million yuan and 27.1733 million yuan respectively, and the total virtual increased profits were 28.2743 million yuan, 24.3919 million yuan and 2.9441 million yuan.

At the same time, Yu diamond is also suspected of falsely increasing inventory, fixed assets and non current assets by means of fictitious purchase transactions, resulting in false records in the annual report from 2016 to 2019; The company provided funds to the actual controller and its related parties in the form of fictitious purchase business, payment of purchase funds, off account loans and issuing commercial bills. It is suspected that it did not disclose the non operating related transactions of occupying funds as required, resulting in major omissions in the annual report from 2016 to 2019.

But curiously, after the announcement of the punishment decision, the stock price of * ST King Kong did not fall but rose. As of August 17, the share price was 2.1 yuan / share. In fact, * ST King Kong, which is deeply involved in fund occupation, illegal guarantee and financial fraud, has repeatedly suggested that the company may have delisting risk. With the implementation of the punishment decision, how far is * ST King Kong from delisting?

According to item (3) of Article 4 of the measures for the implementation of compulsory delisting of Listed Companies in Shenzhen Stock Exchange, the annual reports disclosed by listed companies have false records, misleading statements or major omissions, and the facts identified in the administrative punishment decision of the CSRC shall be taken, The listed company's financial indicators in successive accounting years have actually touched the standards for the termination of listing stipulated in the stock listing rules, and its stocks should be terminated.

However, a person close to the regulator pointed out to the reporter: "the new delisting regulation takes 2020 as the first applicable complete accounting year, and the subject adjustment of Yu diamond involves 2016-2019. Therefore, it should be judged according to the old listing rules whether it has touched the standards of delisting."

According to the listing rules before the revision, that is, the Shenzhen Stock Exchange GEM Listing Rules (revised in November 2018), "due to the important early-stage errors or false records in the financial accounting reports, retrospective adjustments are made to the financial accounting reports of the previous years, resulting in negative net assets at the end of the last two years, and the exchange has the right to decide to terminate its stock listing and trading.".

According to the public data, the net assets of * ST King Kong increased by 1.856 billion yuan at the end of 2019, while the annual report showed that the net assets of the company on December 31, 2019 was 1.721 billion yuan, and the loss in 2020 was 1.236 billion yuan.

This means that after retroactive adjustment on December 31, 2019 and December 31, 2020, the net asset ratio of * ST diamond is negative, and yudiamond is likely to be forced to withdraw from the market due to major violations.

"Whether the company will be forced to delist depends on how the company implements (punishments) and how to correct accounting errors. If the company touches the original delisting index after adjustment, it will be delisted." The regulator said.

Yang Zhiguo, President of Lixin certified public accountants, also said: "according to the old rules, if the net assets of two consecutive years after retroactive adjustment are negative, the listing will be terminated. If according to the new rules, the data in 2019 will not be looked at, so it depends on whether the net assets of the company in 2021 are also negative."

In fact, 2021 is also a key year for Henan diamond.

As early as November 2020, Henan diamond was given other risk warning due to capital occupation and illegal guarantee. In April 2021, it was given delisting risk warning because the audit report of financial statements and notes to financial statements in 2020 was issued with no opinion.

"The type of audit opinion may also be delisted. The company's 2020 annual report is unable to express its opinion. If the audit opinion in 2021 is reserved, cannot be expressed or denied, it will also be delisted." Those close to the regulators pointed out.

What is the winning chance of "shell war"?

Facing the imminent delisting risk, * ST King Kong also felt the crisis.

Recently, Guo Liuxi, chairman of the board of * ST King Kong, publicly told the media: "we want to keep the company, and we have planned to introduce war investment. We have had in-depth communication with well-known domestic law firms. I went out of the house and smoothly handed over the shift smoothly."

In addition, Guo Liuxi also disclosed that he hopes "the faster the reorganization, the better", "it is not far from the disclosure of the annual report. If there is still a non-standard opinion in 2021, the company will be delisted. He hopes that the reorganization can catch up with this, and some auctions of the court will stop to give the company a more relaxed environment for restructuring.".

However, it is less than five months before the end of 2021, and there are big differences on the candidates of the battle throw and the reorganization plan within * ST King Kong.

Earlier, after the shares of Henan diamond held by the company's shareholders Beijing sky Hongding Investment Center (limited partnership) and Beijing Tianzheng ocean fund management center (limited partnership) were successively auctioned, xingkaiyuan No.8 asset management plan of Shanghai Xinghan Asset Management Co., Ltd. (hereinafter referred to as "Xinghan asset management") held 26.70% shares, It is almost the same as the actual controller Guo Liuxi and Henan Huajing Superhard Materials Co., Ltd. (hereinafter referred to as "Henan Huajing") holding 27.42% shares.

However, Guo Liuxi did not welcome Xinghan asset management. Guo Liuxi said: "we hope to enter the company's war investment, which can take root in the industry and help the company to continue its long-term development, rather than purely financial investment, and withdraw suddenly after solving the debt problem. This is not good for the company's development."

"At present, Xinghan asset management and Henan Agricultural Investment Financial Holding Co., Ltd. (hereinafter referred to as" Henan agricultural investment and financial holding ") are intending to take control of the company. We don't think they are suitable candidates. However, it is still unknown until the last moment. Everyone is playing games and communicating with each other, but there is no result."

In addition, Henan Huajing's 7.83% stake also faced a judicial auction. Although the auction was sold out on August 10 this year, it is difficult to guarantee that the equity of * ST King Kong will not fall into turmoil.

As a matter of fact, the bankruptcy reorganization plan of * ST King Kong has not been settled yet.

Previously, there were media reports that in late April, Zhengzhou municipal government, Xingyang municipal government and relevant institutions had discussed the bankruptcy reorganization plan of Henan diamond. However, the plan was opposed by some shareholders and temporarily stranded.

In the view of many investors, the biggest problem facing * ST King Kong is not bankruptcy reorganization, but corporate governance. The Securities Regulatory Commission once commented that Yu diamond case is a typical case of long-term systematic fraud of listed companies, involving huge amount of money, serious illegal nature and bad market influence. ".

As a matter of fact, as early as the end of 2018, Henan Agricultural Investment Financial Holding Co., Ltd. made strategic investment in Henan diamond according to the requirements of the government to resolve risks and relieve private enterprises, becoming its fourth largest shareholder with a shareholding of 7.42%. However, at present, this investment has failed to "end well".

However, if it is impossible to complete the restructuring or introduce the war casting, it will be more difficult to avoid delisting from the current situation of * ST King Kong.

According to the announcement disclosed by * ST diamond, in the first quarter of this year, * ST diamond continued to lose 210 million yuan; By the end of July 2021, the balance of monetary funds available to the company is about 52 million yuan; In recent years, some cooperative banks and non bank financial institutions have cut off loans and withdrawn loans, and the company's financing channels have been blocked. At the same time, due to litigation matters, most of the company's bank account funds, land, foreign investment equity, etc. have been frozen and sealed up, and the company's capital chain is tight and its sustainable operation ability is at risk.

As of August 2, * ST King Kong has been involved in 83 litigation / arbitration cases with a total amount of about 5921.7894 million yuan, including 80 litigation cases involving the company and its holding subsidiary as defendants, with the case amount of about 5692.5618 million yuan; The company and its holding subsidiary were involved in three litigation cases as plaintiffs, with a total amount of about 230.2648 million yuan. The company, the controlling shareholder and the actual controller of the company are listed as the dishonest executee.

At the moment, investor claims may also have a heavy impact on the financial situation of * ST King Kong. It is understood that Shanghai hanlian law firm has carried out investor claim collection. Song Yixin, a lawyer of the law firm, said that from April 27, 2017 to April 7, 2020, the damaged investors who bought shares or bonds of Henan diamond and other securities markets and sold or continued to hold on or after April 8, 2020 can register their claims.