10 GEM companies have issued risk warning announcements to suspend listings. Will this puncture the GEM valuation bubble?

Among the 10 companies that issued delisting risk warnings, most of them were suspected of violating securities law enforcement laws. Only Galaxy Biotech and Jifeng Agricultural Machinery were due to performance reasons (losses for two consecutive years). In fact, many companies have not just issued similar announcements recently. Taking Galaxy Biotech as an example, its first delisting warning announcement was issued on July 18, 2015, and Flush's first delisting warning announcement was issued on August 19, 2015. According to regulations, they are required to continue to issue corresponding announcements within the prescribed period

Unlike main board listed companies, if there is a risk of listing suspension or delisting, GEM listed companies do not have a risk warning period. Listing will be suspended directly until delisting.

Observing the above-mentioned companies that issued listing risk announcements, Galaxy Biotechnology and Jifeng Agricultural Machinery were due to financial indicators (losses for two consecutive years). According to the 2015 performance forecasts released by the two companies, it is expected that It will achieve a turnaround in 2015. If the losses are successfully reversed, the factors that have caused the two companies to suspend their listings will be temporarily eliminated.

What about the remaining eight companies that have been put on file by the China Securities Regulatory Commission for violating securities laws?

According to the announcement, Tonghuashun and Jingtianli have received the "Administrative Penalty Advance Notice" issued by the China Securities Regulatory Commission. Their stock prices have been under significant pressure recently and have significantly underperformed the market.

Six other companies, including Xintai Electric, said they have not yet received the final investigation conclusion from the China Securities Regulatory Commission, and their stock prices have performed relatively strongly (Jinya Technology has been suspended).

But Suspension of listing does not necessarily mean delisting: if the listing is suspended due to performance reasons, you can apply for resumption of listing as long as the performance improves. As for violations of securities law enforcement laws, it needs to be determined on a case-by-case basis. Take Tonghuashun as an example. Apart from being punished by the China Securities Regulatory Commission for providing corresponding trading procedures for "capital allocation" last year, it has not announced any other suspected violations of laws and regulations.

A fund manager in Shanghai said that companies that issued delisting risk warning announcements had frequently issued announcements before, and the current prices have basically reflected the above information.

Relatively speaking, the situation of Jinya Technology is the most special, and the fund has significantly adjusted its valuation. The major shareholder was suspected of misappropriating funds and committing financial fraud, which is similar to the previous Wanfu Biotech case. However, Wanfu Biotech was able to prevent delisting because "the law does not retroactively apply to the past."

Taken together, the risk of delisting is relatively greater for companies that are currently being filed for suspected violations of the law. From the perspective of preventing delisting, investors need to avoid them as much as possible.