Case Study Of Yihua Life’s Compulsory Delisting

On December 31,2020,in order to deepen the reform of my country’s securities market delisting system,improve the quality of listed companies and protect the legitimate rights and interests of investors,the Shenzhen Stock Exchange and the Shanghai Stock Exchange jointly issued the stock listing rules consisting of 8documents(referred to as the "New Delisting Regulations").The "New Delisting Regulations" is the result of a new round of reform of my country’s delisting system.As of the first anniversary of the implementation of the "New Delisting Regulations" at the end of 2021.a total of 27 listed companies have been delisted throughout the year(including 10 forcibly delisted in the financial sector,There were 7 forced delistings in the trading category,9 restructuring delistings,and 1 active delisting).2022 will be a critical year for further implementing the "New Delisting Regulations" and helping to build a securities market ecology with "in and out,survival of the fittest".Yihua Life Technology Co.,Ltd.(referred to as: Yihua Life)is the first "1 yuan delisting" stock under the "New Delisting Regulations".Yihua Life’s information disclosure violation cases is also one of the three typical major violation cases notified by the China Securities Regulatory Commission that apply the "Securities Law" newly revised in 2019 to punish.Therefore,this paper selects the forced delisting incident of Yihua Life as a case study.First of all,this paper reviews the literature on the delisting system of listed companies and the compulsory delisting of listed companies.At the same time,it organizes and compares the current compulsory delisting regulations of my country’s stock exchanges,and introduces relevant theories such as the theory of institutional change,which lays the foundation of regulations and theory for subsequent research.Then,it introduced the basic situation,governance structure,and forced delisting process of Yihua Life Company,and analyzed the reasons for the forced delisting of Yihua Life.In the process of specific analysis,since the forced delisting of Yihua Life triggered the "1 yuan delisting" regulation in the mandatory delisting regulations for transactions,we first analyzed the surface reasons of the forced delisting based on the trading price trend of Yihua Life’s stock.The reasons are: business performance continues to deteriorate in an all-round way,audit reports that cannot express opinions are issued,information disclosure is suspected of illegal.Then,the deep reasons behind it are further analyzed: the "Internet + pan-home" expansion strategy is radical,Huadali which acquired blindly and at a high premium was sold at a low price,long-term high borrowing and financial costs eroded net profit,and the corporate governance structure failed and long-term financial fraud.Finally,from the analysis of the impact of the company itself,the company’s investors,and the capital market where the company is located on the forced delisting of Yihua Life,it is concluded that the forced delisting of Yihua Life will reduce the company’s financing reputation and narrow financing channels,damage the company’s image,reduce the company’s ability to create value,make it difficult to improve the company’s capital structure,and reduce the ability to resist risks;directly cause economic losses of hundreds of millions of yuan to investors,greatly affecting their investment enthusiasm;deterred listed companies and their managers,curbed the unhealthy trend of whitewashing statements and illegal information disclosure,and warned listed companies to prudently carry out diversified strategic expansion.Through the study of this paper,the following inspirations are drawn: Listed companies should operate in a reasonable and appropriate manner,diversify and expand should be stable and rational,and information disclosure should be compliant and lawabiding;investors should establish the concept of value investment,improve risk awareness,and stick to their own circle of competence;regulatory authorities It is necessary to continue to promote the normalized development of the delisting mechanism,strengthen the education of investors,and promote the implementation of the advance compensation system.