Shenzhen firm first to be delisted over low market cap

Shenzhen Universe Group Co., a Shenzhen-listed company mainly engaged in the production and sale of commercial concrete, is set to become the first A-share firm on China’s domestic stock exchanges to be delisted after its market capitalization finished below the minimum requirement of 300 million yuan (US$41.25 million) over the past 20 consecutive trading days.

Shenzhen Universe’s yuan-denominated A shares, which are under the daily trading curb of 5% after the firm has been tagged “ST” (special treatment) to flag delisting or other risks, opened down 5% July 24, the 20th trading session in a row the firm’s market value below 300 million yuan, triggering a delisting according to market rules.

Shenzhen Universe’s shares plunged 5% to 1.81 yuan July 23, giving the firm a market cap of 251 million yuan and heralding that the firm is poised to be expelled from the Shenzhen Stock Exchange.

Even if the firm’s shares were to jump by the daily trading cap of 5% July  24, it would not be able to break through the 300 million yuan threshold.

According to latest rules released by the Shenzhen exchange, a firm’s stock has to terminate trading and face delisting after the firm’s market value plunges below 300 million yuan for 20 straight trading sessions.

Listed in April, 1993, Shenzhen Universe is among the initial group of firms selling shares on the Shenzhen bourse and it is the first publicly traded company in China focused primarily on commercial concrete.

In addition to commercial concrete, Shenzhen Universe also develops real estate and provides property management services. Currently, the firm’s  commercial concrete operations are primarily focused in Shenzhen and Zhuzhou, central China's Hunan Province. Its real estate development  activities are mainly concentrated in Shenzhen, Xi'an, northwestern China's Shaanxi Province and Lianyungang in eastern China's Jiangsu Province, with property management operations located in Shenzhen.

Financial reports show that commercial concrete business accounted for more than 90% of Shenzhen Universe’s total revenue in 2022 and 2023.

The protracted downturn in the real estate sector has weighed heavily on its  concrete business, resulting in a contraction in both demand and supply, Shenzhen Universe said. In 2023, the company's sales and production of concrete decreased 51.43% year on year, a decline attributed by Shenzhen Universe in its 2023 annual financial report to “slumping market demand, fierce competition, high pressure on capital turnover, and rising costs.”

Shenzhen Universe has seen its revenue decline year after year since 2020 and has recorded losses for four consecutive years. Its revenue slumped to 178 million yuan last year, down sharply from 1.8 billion yuan for 2020. The company expects a net loss of between 80 million and 100 million yuan for the first half of 2024, compared with a loss of 50.10 million yuan in the same period last year.

Shenzhen Universe is not the first firm losing its listing status after languishing below the 300 million yuan market cap threshold.  

Chongqing Jianshe Vehicle System Co., which listed Hong Kong dollar-denominated B shares on the Shenzhen exchange, announced June 19 that it lost its  listing status after its market value was below 300 million yuan between May 17 and June 14 this year, making the firm the first B-share firm booted from a domestic stock exchange due to failing to a low market capitalization.

In recent years, China has been stricter with the delisting rules to clean up the stock market and bolster investor confidence in the stock market.

A total of 47 companies were removed from the Shanghai and Shenzhen exchanges in 2023, according to the China Securities Regulatory Commission, while the number of delistings struck an all-time high of 46 in 2022.

Before the recent uptick, less than 10 companies were delisted each year between 2008 and 2018, with only one each in 2014 and 2016, data from the country’s Shanghai and Shenzhen stock exchanges show.

Most companies were delisted for trading below the one-yuan par value for 20 sessions in a row, one of the conditions which could trigger a delisting.

Besides the breach of the par values, other conditions that could lead to delisting in China include three straight years of losses, falsified accounting and failure to disclose financial results in a timely manner.