Financial regulation

ChiNext board likely to banish Geeya Technology for inflating profit ahead of IPO

PUBLISHED : Wednesday, 27 June, 2018, 1:32pm
UPDATED : Wednesday, 27 June, 2018, 11:14pm

A maker of digital television equipment looks set to become the second ever company to be expelled from China’s technology-heavy ChiNext board.

The Shenzhen Stock Exchange, which operates the Nasdaq-style board, has started delisting procedures against Geeya Technology after regulators found it had inflated sales and profits data in its initial public offering, according to a statement on the bourse’s website.

The exchange will make a final decision on whether to delist the company, possibly within the next 30 days, the statement said.

Shares of Geeya, based in the western city of Chengdu, tumbled by 9.9 per cent to 2.83 yuan at the close on Wednesday, with only 0.2 per cent of its outstanding shares changing hands. The stock has lost 66 per cent of its value over the past year.

Geeya is the latest target of China’s securities watchdog, which has in recent years ratcheted up its campaign against market excesses ranging from insider trading and manipulation to fraudulent offerings. The company was found to have inflated net income for 2008 by 85 per cent and profit for the first half of 2009 by 109 per cent by falsifying contracts and customers to improve its chances of a successful IPO, the China Securities Regulatory Commission (CSRC) said on Tuesday.

Geeya’s chairman, Zhou Xuhui, was fined 900,000 yuan (US$136,430), while those involved in the fraudulent offering will be referred to the police to face criminal charges, the securities regulator said.

The CSRC has been criticised by investors for being too lax when it comes to delistings. Allowing unqualified companies to remain on the stock exchange has often led to speculative trading that bets on a bailout will eventually send these shares soaring.

Delisting candidate Xintai sees shares soar on last trading day

The ChiNext board, which hosts 750 companies, had not witnessed its first delisting until last year when Dandong Xintai Electric was banished because of fraud in its stock offering. Its shares last traded at 1.48 yuan before they were delisted.

Geeya’s stock will probably be allowed to trade for a final 30 days on the Shenzhen exchange, starting from Wednesday. After that, the stock will be suspended and the bourse is likely to make the final delisting call within 15 days.