Chinese Delistings on U.S. Exchanges

The singlemost important goal for every Chinese company that decided to become publicly traded in the U.S. was to obtain a listing on a senior exchange, NASDAQ or NYSE / NYSE Amex. The reason that many companies chose a reverse merger as their method of going public was that it was much faster and significantly cheaper than a traditional IPO. And many of those reverse merger companies succeeded in getting their stock listed on a senior exchange within a few years.

This listing comes with a number of benefits. First of all it is much cheaper to raise capital when the stock is no longer just quoted on the bulletin boards. And raising capital is a primary reason for going public also for Chinese companies. Secondly this listing creates a liquid market outside of the PRC for Chinese shareholders, and in China money, personal wealth, and with it status is of prime importance, not comparable with Europe or the U.S.

That leads to the third, and probably most important reason for going public in the U.S.: recognition and prestige for the company and its officials. Being a U.S. public company with a NASDAQ or NYSE listing leads to prestige with both customers and suppliers, but also local banks and government. The good will of especially banks and local government officials is extremely important for a small Chinese company. In a country where success in business is largely based on networking and guanxi, status and prestige are invaluable assets for a young company.

But it also means that a delisting notice from NASDAQ or NYSE comes with great embarrassment for the company. In most cases not only the stock price will collapse, but the repercussions for the company's business in China could be severe if it loses that good will from banks and influential officials in the local government administrations. A Chinese company with a delisting notice will always pull all strings possible to maintain their senior exchange listing, not for the best of its foreign shareholders but for their very own survival.

There is no such thing as a "voluntary delisting" from a Chinese company. If you read such a phrase, stay away from the stock. A company that had its stock delisted without much of a fight is either a fraud or it has given up on its public status, in both cases you don't want to touch the stock.

We have seen more than 50 Chinese delistings over the past two years, and with very few exceptions all those companies were frauds or they have now stopped filing reports with the SEC for other reasons. Only the handful of companies that stayed current in filing its Form 10Qs and 10Ks at all times since the delisting are worth a second look.

Chinese Delistings from NYSE/NASDAQ:

2012-09-25 -- SCEI Sino Clean Energy -- Delisting from NASDAQ
2012-09-21 -- CVVT China Valves Technology -- Delisting from NASDAQ
2012-09-07 -- BEST Shiner International -- Delisting from NASDAQ
2012-07-11 -- CDII China Direct Industries -- Delisting from NASDAQ
2012-06-25 -- CAST ChinaCast Education -- Delisting from NASDAQ
2012-06-21 -- CNEP China North East Petroleum -- Delisting from NYSE Amex
2012-06-15 -- XINGF Qiao Xing Universal Resources -- Delisting from NASDAQ
2012-06-15 -- WUHN Wuhan General Group -- Delisting from NASDAQ
2012-06-15 -- QXMCF Qiao Xing Mobile Communication -- Delisting from NASDAQ
2012-06-15 -- CNGL China Nutrifruit -- Delisting from NYSE Amex
2012-05-29 -- AOBI American Oriental Bioengineering -- Delisting from NYSE Amex
2012-05-10 -- CKUN China Shenghuo Pharmaceutical-- Delisting from NYSE Amex
2012-05-08 -- UTRA Universal Travel Group -- Delisting from NYSE
2012-04-26 -- ZSTN ZST Digital Networks -- Delisting from NASDAQ
2012-03-08 -- CSKI China Sky One Medical -- Delisting from NASDAQ
2012-03-08 -- CHNG China Natural Gas -- Delisting from NASDAQ
2012-02-10 -- FEED Agfeed Industries -- Delisting from NASDAQ
2012-01-26 -- DGWIY Duoyuan Global Water -- Delisting from NYSE
2011-12-29 -- CEAI China Education Alliance -- Delisting from NYSE Amex
2011-11-30 -- ABAT Advanced Battery Technology -- Delisting from NASDAQ
2011-11-18 -- CIIC China Infrastructure Investment -- Delisting from NASDAQ
2011-10-21 -- ORSX Orsus Xelent Technologies -- Delisting from NYSE Amex
2011-10-19 -- CTESY SinoTech Energy -- Delisting from NASDAQ
2011-10-17 -- CCDM China Century Dragon Media -- Delisting from NYSE Amex
2011-10-07 -- KEYP Keyuan Petrochemicals -- Delisting from NASDAQ
2011-10-04 -- AUTCF AutoChina International -- Delisting from NASDAQ
2011-09-26 -- APWR A-Power Energy -- Delisting from NASDAQ
2011-09-12 -- WATG Wonder Auto Technology -- Delisting from NASDAQ
2011-09-02 -- PUDA Puda Coal -- Delisting from NYSE Amex
2011-08-17 -- LGFTY Longtop Financial -- Delisting from NYSE
2011-08-04 -- JGBO Jiangbo Pharmaceuticals -- Delisting from NASDAQ
2011-07-21 -- YUII Yuhe International -- Delisting from NASDAQ
2011-07-12 -- HQSM HQ Sustainable Maritime -- Delisting from NYSE Amex
2011-07-05 -- CHBT China-Biotics -- Delisting from NASDAQ
2011-06-24 -- SBAY Subaye -- Delisting from NASDAQ
2011-06-24 -- NIVS NIVS IntelliMedia Technology -- Delisting from NYSE Amex
2011-06-24 -- CRTP China Ritar Power -- Delisting from NASDAQ
2011-06-15 -- CBEH China Integrated Energy -- Delisting from NASDAQ
2011-06-14 -- CILE China Intelligent Lighting -- Delisting from NYSE Amex
2011-06-14 -- CELM China Electric Motors -- Delisting from NYSE Amex
2011-05-20 -- CAGC China Agritech -- Delisting from NASDAQ
2011-05-19 -- CCME China MediaExpress -- Delisting from NASDAQ
2011-04-13 -- DYNP Duoyuan Printing -- Delisting from NYSE
2011-03-29 -- FUQI Fuqi International -- Delisting from NASDAQ
2010-12-08 -- RINO RINO International -- Delisting from NASDAQ

We have identified 24 additional Chinese companies that have already received a delisting notice from their exchange or will likely get such a letter in the near future. Those companies will have their common stock delisted within the next six months unless they take immediate action, usually a reverse stock split (approved by the exchange) will do the trick of getting their stock price above the crucial one dollar level.

Some companies have already completed a reverse split, including Cleantech Solutions International (CLNT, 1:10 Reverse Split on 2012-03-06), China Precision Steel (CPSL, 1:12 Reverse Split on 2012-08-28), and China Information Technology (CNIT, 1:2 Reverse Split on 2012-03-02). Even though the stock price usually suffers even more after a reverse split, this is actually a good sign as the company decided not to give up on its senior exchange listing. Again, any Chinese stock that was delisted for violating the $1 minimum bid price rule without the company fiercly fighting for its survival on NASDAQ or NYSE should be avoided no matter what.

Chinese Stocks Facing Delisting:

BWOW Wowjoint Holdings
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on October 29, 2012)
CADC China Advanced Construction Materials
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 19, 2013)
CALI China Auto Logistics
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on January 28, 2013)
CBAK China BAK Battery
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 21, 2012)
CJJD China Jo-Jo Drugstores
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 27, 2013)
CNET ChinaNet Online
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 26, 2012)
CNYD China Yida Holding
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 31, 2012)
CPGI China Shengda Packaging
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on November 5, 2012)
DEER Deer Consumer Products
-- Trading Halted since 2012-08-13
DQ Daqo New Energy
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 20, 2013. Reverse Split likely.)
GPRC Guanwei Recycling
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on January 7, 2013)
HEAT SmartHeat
-- Trading Halted since 2012-05-30
HGSH China HGS Real Estate
-- Minimum $1 Bid Price Rule Violation (NASDAQ Delisting Notice served on January 18, 2012, status unclear)
KONE Kingtone Wirelessinfo Solution
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 17, 2012)
LZEN Lizhan Environmental
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on October 8, 2012)
MCOX Mecox Lane
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 4, 2013. Reverse Split intention announced.)
NFEC NF Energy Savings
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on February 26, 2013)
QKLS QKL Stores
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on March 4, 2013)
SIHI SinoHub
-- Trading Halted since 2012-09-07 (Delisting certain)
SUTR Sutor Technology
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 24, 2012)
THTI THT Heat Transfer Tech
-- Trading below Minimum $1 Bid Price since September 10, 2012
VALV Shengkai Innovations
-- Minimum $1 Bid Price Rule Violation (Compliance period ends on December 31, 2012)
VISN VisionChina Media
-- Trading below Minimum $1 Bid Price since June 6, 2012
ZOOM Zoom Technologies
-- Trading below Minimum $1 Bid Price since August 31, 2012

NYSE Amex does not have a $1 Minimum Bid Price Rule, yet their regulations state that they can delist a stock when "the aggregate market value of the security has become so reduced as to make further dealings on the Exchange inadvisable." It should also be noted that NYSE Amex recently amended its listing regulations to include several paragraphs about reverse merger companies which now have increased initial listing requirements. Given the large number of Chinese RTO blow-ups on NYSE Amex over the last two years we see the following eight Chinese small caps at risk duet to their low stock price:

AXN -- Aoxing Pharmaceuticals (Day Close below $1.00 since July 18, 2011)
CBP -- China Botanic Pharmaceutical (Day Close below $1.00 since November 11, 2011)
CHGS -- China Gengsheng Minerals (Day Close below $1.00 since February 14, 2012)
CNAM -- China Armco Metals (Day Close below $1.00 since August 17, 2011)
CPHI -- China Pharma Holdings (Day Close below $1.00 since September 29, 2011)
NEWN -- New Energy Systems (Day Close below $1.00 since November 15, 2011)
SHZ -- China Shen Zhou Mining (Day Close below $1.00 since May 8, 2012)
TPI -- Tianyin Pharmaceutical (Day Close below $1.00 since November 15, 2011)