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Blockchain

Shenzhen exchange to clamp down on claims of blockchain expertise by listed firms

Companies have been investing in blockchain-related businesses, and even changing their names to claim blockchain know-how, with the aim of hyping up their share price

PUBLISHED : Wednesday, 17 January, 2018, 2:23pm
UPDATED : Wednesday, 17 January, 2018, 2:23pm

Shenzhen Stock Exchange, one of China’s two major bourses, issued a warning notice on Tuesday evening saying it would punish any company that uses the buying of blockchain-related stocks, or falsely claims to be developing blockchain business models to hype up their own share performance.

“We have interviewed 17 companies about their business models and investments in developing blockchain-related operations,” the Shenzhen bourse said on its official WeChat account, which has become am effective tool for companies and regulators to issue announcements, due to the platform’s massive traffic.

The exchange “is to make enquiries on the progress of companies using blockchain technologies in their business operations, and how the technology could boost their revenues”.

“We would implement administrative punishment on any companies which continue to use the concept of blockchain to create hype in their [own] share price, or misguide investors.

“Those who have breached the law by doing so, or those in future, will be dealt with by the China Securities Regulatory Commission (CSRC).”

While many investors continue to get their heads around what exactly is blockchain – a decentralised and distributed digital ledger used mostly to secure bitcoin transactions – equity markets across the globe have generally welcomed the concept with open arms.

We would implement administrative punishment on any companies who continue to use the concept of blockchain to create hype in their [own] share price, or misguide investors. Those who have breached the law by doing so, or those in future, will be dealt with by the China Securities Regulatory Commission

One of the most prominent cases of “hyping” has seen a US company, whose original name was Long Island Iced Tea, watch its shares surge more than 200 per cent after changing its name to Long Blockchain Corp last year.

Nasdaq-listed Chinese company Sky People Fruit Juice, meanwhile, saw its shares surge more than 200 per cent after changing its name to “Future Fintech” last December.

But the company still mainly sells juice and there are no signs yet of any transformation into a fintech.

Various domestically listed Chinese firms who have managed to link their business to blockchain by either simply adding the word to their company name, or announcing plans to develop related business models related to the technology, have seen their shares rise in value on mainland bourses.

The A-share blockchain index (which includes major blockchain related companies), has risen more than 14.2 per cent in the year to date, compared with a flat performance for the Shenzhen Stock Exchange Composite Index during the same period.

The phenomenon is being compared with the internet stock buying craze of the late 1990s, when even non-technology companies who added a dotcom suffix or “E” prefix to their name, enjoyed dramatic surges in their share price.

“Logically speaking, adopting blockchain might indeed help companies improve their operational efficiency,” said Ou Yang Yujian, an A-share analyst at Chuncai Securities.

“However, in terms of company profits and revenues, it will not help that much.”

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