From The Demon Stock To The Delisted Stock:What Does Baofeng Technology Reflect

Chinese stock market fluctuated abnormally in 2015,showing a situation that thousands of stocks hit their price limits within a single trading day.Most of the "demon stocks" listed during this period suffered from a decline in operating performance and lower stock prices in the next three to four years,and fell into the dilemma of wearing a hat warning or being forced to delist.In order to explore why such companies are prone to explosive performance,the thesis selects Baofeng Technology as a typical case study,and combines the time points of major events and stock price trends to divide the life course of Baofeng Technology into four evolution stages,including the pre-IPO glory,the sharp rise of the stock price at the beginning of the IPO,the sharp drop and continuous decline of the price,and the eve of delisting.The stage of pre-market: due to the difficulty of domestic financing,Baofeng Technology built a VIE structure,and received a total of 14 million US dollars in financing from foreign venture capital institutions from 2006 to 2009.However,the opening of the GEM in 2009 provided low-threshold financing services for Baofeng Technology,a growing company with a small market capitalization and low short-term performance,which caused Baofeng to dismantle the VIE structure and return to the domestic GEM for listing.The listing decision of Baofeng Technology fully reflects the important influence of the institutional environment of the capital market on corporate decision-making.Regulators should comprehensively improve the domestic financing environment and enhance the vitality and attractiveness of the domestic capital market.The stage of stock price surge at the beginning of listing: Baofeng Technology was listed on the Growth Enterprise Market on March 24,2015.Within 40 trading days after listing,it pulled out 37 daily limit boards,becoming a "demon stock" that investors talk about.The impact of industry index bubbles,the proportion of intangible assets and average R&D investment are factors that significantly affect Baofeng Technology’s opening price-earnings ratio.The three factors account for about 10%,8% and 60% of the price-earnings ratio respectively.Regulatory agencies failed to control OTC allocation in a timely manner,and investors blindly followed suit to form a "leveraged bull market",reflecting the problems of weak government supervision and investors’ lack of rational investment ability.The stage of stock price crash and continuous decline: affected by the stock market crash,Baofeng Technology’s stock price plummeted.In the following two or three years,the stock price of Baofeng Technology continued to fall due to its own reasons such as poor management of diversified businesses.The empirical results show that the industry index bubble and the decline in inventory turnover rate have a significant positive impact on the decline of individual stock prices,resulting in a 10.84% and14.77% decline in stock prices,respectively.The case at this stage warns that enterprises should make prudent decisions,ensure sufficient resources and management capabilities to support the development of new businesses in diversified expansion,and avoid the development of core businesses from being dragged down by the dispersion of resources.The stage of pre-delisting: Baofeng established Jinxin Fund to acquire MPS in2016.The bankruptcy of MPS caused Baofeng to fall into debt crisis and legal disputes,and was forced to delist because it failed to issue the 2019 annual report.Before the storm was delisted,it was hyped by hot money,and the stock price rebounded.This stage reflects the low efficiency of market delisting and the speculation of junk stocks.On the one hand,regulators are required to improve the existing delisting system to reduce the number of bad companies,strictly review and disclose information on listed companies,and protect the interests of investors.On the other hand,investors are required to make rational investment decisions and prudently treat investment opportunities in junk stocks.Overall,Baofeng Technology has gone from the much-anticipated "demon stock" to the delisted stock in just 5 years,which reflects the unreasonable IPO pricing,investors blindly follow the trend of investment,low delisting efficiency,and serious speculative stock speculation and other problems.