Jinzhou Port, a listed company in mainland China, has been found to have committed financial fraud for four consecutive years, with the amount reaching 8.6 billion yuan (RMB). Today (June 3), the company’s stock was suspended for one day and resumed trading as “ST” afterwards. The sudden news has left nearly 100,000 shareholders in shock. Financial fraud by listed companies in mainland China has repeatedly occurred, severely damaging the interests of investors.
On the evening of May 31, Jinzhou Port announced that it had received a “Pre-penalty Notification for Administrative Penalties and Market Entry Prohibitions” issued by the China Securities Regulatory Commission.
According to the relevant provisions of the Shanghai Stock Exchange Listing Rules, the company’s stock was subject to other risk warnings. The company’s stock was suspended for one day starting from June 3 and resumed trading on June 4, with the A-share stock symbol changed to “ST Jingang” and the B-share symbol to be changed to “ST Jingang B.”
From 2018 to 2021, Jinzhou Port and related companies falsely inflated their operating income, operating costs, and total profit through trade business, leading to false reporting in the annual reports from 2018 to 2021.
During the same period, Jinzhou Port, along with seven companies including Dalian and Border Trade Co., Ltd., falsely inflated their operating income, operating costs, and total profit through trade business. Specifically, they falsely inflated revenue by approximately 2.12 billion yuan, 3.947 billion yuan, 2.48 billion yuan, and 0.75 billion yuan in 2018, 2019, 2020, and 2021 respectively, totaling over 8.6 billion yuan in four years with inflated profits of 179 million yuan.
Due to the false reporting in the annual reports from 2018 to 2021, the company was fined 8 million yuan.
In terms of stock price, Jinzhou Port’s A-share closed at 2.28 yuan per share on May 31, while the B-share closed at 0.169 US dollars per share, approximately 1.22 yuan per share when converted at the exchange rate of 1:7.2418, approaching the delisting threshold of 1 yuan.
However, according to the listing rules of the Shanghai Stock Exchange, for companies that issue both A-shares and B-shares, the closing prices of both shares must meet the relevant standards simultaneously to trigger delisting conditions.
It is worth mentioning that Jinzhou Port was already under investigation by the China Securities Regulatory Commission last year. In November 2023, Jinzhou Port announced that it had received a notice of investigation from the regulatory commission for suspected illegal information disclosure.
Financial media have identified Jinzhou Port as one of the listed companies and executive names under investigation since 2023.
In terms of market performance, Jinzhou Port’s stock price has been continuously declining this year, with a cumulative decline of over 20%. Since 2018, the stock price has been hovering around 3 yuan, but has dropped by 78.36% compared to the peak this year.
As of May 31, the company’s market value has shrunk to 4.565 billion yuan and the latest number of shareholders is 96,400.
The news of Jinzhou Port’s 86 billion yuan financial fraud over four years has sparked discussions among mainland investors. With the fraud being exposed, the stock has changed to “ST Jingang,” leaving nearly 100,000 retail investors in shock.
According to an article from the self-media outlet “Qingliu Caiji,” Jinzhou Port’s financial fraud and its transformation into an ST stock have greatly affected the confidence in A-shares, severely harming the interests of investors. Previously, it was believed that only private enterprises engaged in financial fraud, but now China’s 200 million retail investors have realized that state-owned enterprises are also questionable and no longer worth the investment.
Recently, four other listed companies announced being under investigation, namely Zhengwei New Materials, Guandian Defense, ST Zhengtong, and *ST Baan. The reasons for the investigation of these four companies are all related to suspected violations of information disclosure regulations.
Since 2023, a total of 102 companies in the Shanghai and Shenzhen stock exchanges have been involved in investigations of listed companies themselves and their executives, with none closed as of yet. Among them, nearly 60 listed companies are under investigation for suspected violations of information disclosure regulations.
“Qingliu Caiji” states that corporate financial fraud is a deliberate violation that breaches the trust line. The A-share market continues to see numerous cases of fraud, making it difficult to guard against. Many companies engage in fraud, leaving retail shareholders in the dark and bearing the consequences.
The article from “Qingliu Caiji” suggests promptly establishing a delisting compensation mechanism, where regardless of the reasons for delisting, listed companies and major shareholders should be held accountable for compensating retail investors for their market value losses. This will ensure that innocent investors receive proper compensation, truly protecting them.