On June 28, the Shenzhen Stock Exchange announced the termination of the listing of Beijing Zuojiang Technology Co., Ltd. (Zuojiang Technology), a company that was known as a major player in the Chinese chip industry, often compared to “benchmarking NVIDIA.” This news made it to the top searches on Baidu on June 30.
The exchange stated in its announcement that Zuojiang Technology’s net profit before and after deducting non-recurring gains and losses for the 2022 fiscal year was negative and that its operating income was below 100 million yuan (RMB). Consequently, the company’s stock had been under the risk alert for delisting since May 4, 2023.
On April 29, 2024, Zuojiang Technology disclosed its first annual financial accounting report after being subject to the risk alert for delisting. The report showed a net profit of -222.6875 million yuan for the 2023 fiscal year, triggering the delisting process due to the inability to express an opinion on the financial audit report for that year. Therefore, the Shenzhen Stock Exchange decided to delist Zuojiang Technology’s stock. Trading of the stock entered the delisting process period starting from July 8, 2024. The stock would be delisted on the next trading day after the expiration of the delisting period.
In the evening of the 28th, Zuojiang Technology also announced that its stock had entered the delisting process for trading. The delisting process commences on July 8, with the last trading day expected to be on July 26. The stock will be delisted on the subsequent trading day after the delisting period expires, marking the end of the company’s stock listing.
Founed on December 1, 1990, Zuojiang Technology made its debut on the Growth Enterprise Market in October 2019. From 2021 onwards, the company had been continuously disclosing its research and development of “Programmable Network Data Processing Chips.” In the chip industry, the Data Processing Unit (DPU) was considered the new “third core chip,” with companies like NVIDIA representing the leading players in this field.
An article from the “Daily Economic News” on June 29 mentioned that due to Zuojiang Technology’s association with DPU chips, which fueled significant imagination in the stock price, the company, known for its products benchmarked against NVIDIA, had no other sales revenue apart from one uncertain transaction by the end of the third quarter of 2023.
Despite a significant decline in performance and receiving a risk alert on its stock (denoted by the ST symbol), as a scarce concept stock related to DPU, Zuojiang Technology’s stock price continued to rise. In July 2023, it reached as high as 299.8 yuan per share, earning the title of the “most expensive ST stock in history.”
However, on November 24, 2023, the delisting-risk company Zuojiang Technology became the subject of an investigation by the China Securities Regulatory Commission. On January 30, it was revealed that the financial information disclosed by the company for 2023 was severely inaccurate, suggesting significant financial fraud.
Following the announcement, Zuojiang Technology’s stock price plummeted rapidly. By its last trading day before suspension on June 28, the stock price had fallen to 6.94 yuan per share, with a total market value of 708 million yuan, representing a 97% drop from its peak in July of the previous year.
During the fourth quarter of 2023, Zuojiang Technology saw a growth of over 13,000 shareholders, which coincided with the decline of *ST Zuojiang’s share price from its highs. As of June 28, 2024, the company still had 12,000 shareholders.
Lawyer Zhao Jingguo from the Shanghai Xiben Law Firm, in an interview with the “Mass Securities Newspaper,” stated that based on publicly available information, investors who purchased *ST Zuojiang stocks before December 4, 2023, and held positions, regardless of whether they sold the shares after that date, potentially have grounds for claims against the company.
The “Daily Economic News” reported that Zuojiang Technology had claimed to have invested over one billion yuan in a project site, which was overgrown with weeds and showed no signs of construction.