Yang Yunfei

1017800664@qq.com

SHENZHEN Universe Group Co., a concrete manufacturer, is set to become China’s first A-share firm to be delisted due to a low market capitalization.

Universe (SZ 000023) dropped by 4.97% to 1.72 yuan (US$0.24) yesterday with a market cap of 238.5 million yuan.

The rules say that if a company’s valuation remains below 300 million yuan for 20 straight trading days, it will be forced to leave the stock market, which has been the case for Universe. The company's business has shrunk in recent years amid the property market downturn.

Listed in April, 1993, Shenzhen Universe was among the initial group of firms selling shares on the Shenzhen bourse and the first public company in China that manufactures commercial concrete.

In addition to concrete, it develops real estate and provides property management services. Currently, the firm’s commercial concrete operations are primarily focused in Shenzhen and Zhuzhou, Hunan Province. Its real estate business is mainly in Shenzhen, Xi’an in Shaanxi Province and Lianyungang in Jiangsu, with property management operations in Shenzhen.

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 forecasts 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 being delisted 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 shrank to below 300 million yuan between May 17 and June 14 this year. The firm was the first B-share company booted from a domestic stock exchange due to low market cap.

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

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.

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