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1st LD: China delists company over IPO fraud for first time

Xinhua, July 8, 2016 Adjust font size:

China will for the first time expel a company from its stock market for fraud in initial public offering (IPO) as authorities move to toughen regulation.

Procedures will be launched to delist Dandong Xintai Electric, an electrical equipment maker based in Liaoning Province, as the company has been convicted of fabricating financial data in its IPO application, the China Securities Regulatory Commission (CSRC) announced on Friday.

It is the severest penalty ever against IPO fraud in China.

The company will be barred from relisting, CSRC spokesperson Zhang Xiaojun told a regular press briefing, saying the country's capital market will have "zero tolerance" for IPO fraud.

It is unclear when the delisting procedures will be finished, but it took less than two months for another company to be delisted for violating information disclosure rules earlier this year.

The CSRC launched a four-month probe into Shenzhen-traded Xintai last year after spot inspections revealed problems in its financial data.

It was found to have provided fake data of collected receivables in its financial reports from 2011 to 2014, cooking up numbers ranging from 200 million yuan (29.9 million U.S. dollars) to over 70 million yuan by forging bank drafts or receipts, investigators said.

The company used the false information to get listed on the NASDAQ-style ChiNext board of the Shenzhen Stock Exchange in March 2014. A previous IPO application had been rejected in 2011 due to lack of profitability in the assets it required.

Investigators also found neglect of duty by the company's boards of directors and supervisors, with some board members confessing they never cared about the subjects of company meetings and were only there to sign papers.

Xintai Chairman Wen Deyi admitted fabricating financial information, but said he thought the violation was not grave enough to warrant a delisting.

The company now has no way out but to go bankrupt, he said.

Xintai's shares have been suspended on the Shenzhen Stock Exchange since May 23. Trading will resume on July 12, according to a company statement. Endi