Since going public, ST Aikang has raised a cumulative total of over 5.5 billion yuan in financing, with net profit losses approaching 3 billion yuan. Now, it is on the brink of delisting, leaving 270,000 shareholders with no way out, while the controlling family has cashed out more than 2 billion yuan.

From its listing in 2011 to the present, including the IPO fundraising, ST Aikang has raised funds three times, obtaining a net amount of over 5.5 billion yuan from the capital market. However, the substantial financing has not only failed to promote business development but has also been completely wasted due to the company's continuous losses.

Public data shows that in the second year after its listing, ST Aikang's performance quickly turned to a loss. Although there were profits in the following years, the scale has always been limited. In the five years after 2019, except for 2022, the other four years all suffered huge losses. After deducting some years of profits, the company's net profit loss has approached 3 billion yuan in the 13 years since its listing.

Despite the company's huge financing and huge losses, ST Aikang's controlling shareholders and related parties have already made a clean getaway. First Financial has found that the actual controller and controlling shareholder represented by Zou Chenghui, after several reductions, has reduced the shareholding ratio from 43.63% at the beginning of the listing to 6.4% at the end of March this year, and the corresponding cashed-out amount has exceeded 2 billion yuan. If equity pledges are added, Zou Chenghui and his family and related parties may have cashed out more than 2.3 billion yuan in total.

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Moreover, the enterprises controlled by Zou Chenghui and his family have also repeatedly occupied a large amount of ST Aikang's funds. Regulatory investigations have found that from 2017 to 2019, the company provided a total of about 4 billion yuan in financial assistance to Jiangsu Aikang Industrial Group Co., Ltd. (hereinafter referred to as "Aikang Industry") controlled by the Zou family. As of the end of last year, among the 29 major external guarantees of ST Aikang, many are also related to the related enterprises of the Zou family.

After the actual controller's family has squeezed every last drop, ST Aikang has reached the brink of delisting. As of June 14, the company's stock price has been below 1 yuan for 18 consecutive days, and more than 270,000 investors may find it difficult to extricate themselves.

In response to this situation, industry insiders suggest that in addition to strictly pursuing the legal responsibility for false statements, financial fraud, and other illegal and irregular behaviors of listed companies and their controlling shareholders, a more comprehensive investor protection system should also be established. For example, in some countries, whether it is mandatory delisting or voluntary delisting, listed companies must repurchase shares.

As of the close on June 14, the latest stock price of ST Aikang was only 0.41 yuan, with a total market value of only 1.835 billion yuan. Since it has been below 1 yuan for 18 consecutive trading days, there is no suspense about the "par value delisting" of this stock.

Public information shows that ST Aikang was established in 2006 and was listed on the Shenzhen Stock Exchange in 2011. It was once a leading enterprise in the photovoltaic manufacturing sector. For more than 13 years since its listing, the company has raised more than 5 billion yuan in direct financing in the capital market.According to the prospectus, ST Aikang issued 50 million shares at an IPO price of 16 yuan per share, raising approximately 759 million yuan after deducting issuance expenses. Subsequently, the company initiated seven rounds of private placements, although only two were ultimately successful, the funds raised were substantial. In 2014, the company issued an additional 62.5 million shares at a price of 16 yuan, raising 970 million yuan in actual funds; in 2016, it issued 398 million shares at a price of 9.63 yuan, raising 3.777 billion yuan. Based on these calculations, ST Aikang's initial public offering and subsequent private placements raised a combined total of approximately 5.506 billion yuan.

However, after raising a significant amount of capital, ST Aikang's performance did not improve; instead, it suffered substantial losses, with cumulative net losses approaching 3 billion yuan. The market value also shrank from a peak of 27 billion yuan in 2021 to the current 1.926 billion yuan, a reduction of about 93%, with approximately 25 billion yuan of market value evaporating. Based on the latest stock price, the company's market value is now less than 35% of the amount raised.

The substantial capital raising did not boost ST Aikang's performance. Shortly after going public in 2012, the company's performance began to deteriorate, with a net profit loss of about 56.04 million yuan that year. From 2013 to 2018, although it never incurred a loss, the net profit fluctuated around 100 million yuan. Starting in 2019, after transitioning into the HJT battery business, ST Aikang began to suffer massive losses. That year, due to the provision for long-term equity investment losses and other impairments, the company's net profit loss reached 1.612 billion yuan; after a brief profit of 17.15 million yuan in 2020, it incurred losses of 406 million yuan, 833 million yuan, and 826 million yuan in 2021, 2022, and 2023, respectively.

The controlling shareholder has cashed out over 2 billion yuan.

At the beginning of ST Aikang's listing, the Zou Chenghui family, through Jiangsu Aikang Industrial Group Co., Ltd. (hereinafter referred to as "Aikang Industry"), Aikang International, and Aikang Investment, held a combined stake of 43.63%. However, as of the end of March 2024, Zou Chenghui and related parties' holdings were reduced to only 6.4%. Over more than a decade, the controlling shareholders and related parties have continuously cashed out through share reductions and utilized equity pledges to "escape like a cicada shedding its skin."

Based on incomplete data from Choice, from 2015 to 2022, Zou Chenghui and related parties conducted more than 30 share reductions, with a total of about 627 million shares reduced, amounting to 2.054 billion yuan in cashed-out funds.

During the process of share reduction by the Zou Chenghui family, it was accompanied by the favorable news of ST Aikang's transformation. For example, at the end of 2019, ST Aikang announced that the company planned to raise no more than 1.3 billion yuan through a non-public offering, to be used for a 1GW high-efficiency heterojunction (HJT) photovoltaic cell and module project and to supplement working capital. At that time, the industry believed that the company's move was to officially enter the photovoltaic HJT battery field. Subsequently, the stock price rose slightly. It was during this period that the controlling shareholder reduced holdings by 11.96 million shares and 16.38 million shares.

Similar to this was the situation in 2021. At that time, the hype for HJT heterojunction batteries in the capital market was heating up. ST Aikang stated in its semi-annual report for that year that the company had four major bases in Suzhou, Taizhou, Ganzhou, and Huzhou, and planned to achieve 22GW of heterojunction battery capacity within five years. Subsequently, the stock soared, rising from 2 yuan per share at the end of July 2021 to a peak of over 6 yuan per share in mid-November, an increase of more than 200%. During this period, Aikang Industry, controlled by Zou Chenghui, intensively reduced holdings, selling 69.03 million shares in nine transactions, cashing out about 321 million yuan.

While cashing out in large amounts, Zou Chenghui and related parties have almost entirely pledged their shares in ST Aikang. Through a high proportion of equity pledges, Zou Chenghui's side has also obtained a substantial amount of funds.Financial report data indicates that as of the end of the first quarter of this year, Ai Kang Industry, controlled by Zou Chenghui, has pledged a cumulative 98,155,000 shares of ST Ai Kang, with a cumulative pledge ratio as high as 99.99%.

First Financial has combed through announcements from the past five years and found that between 2021 and 2023, Ai Kang Industry pledged the aforementioned 98,155,000 shares in 7 separate transactions, with the pledgees being Hangzhou Yuhang Jin Kong Small Loan Co., Ltd., Xingtie No. 1 Industrial Investment Fund (Limited Partnership), and Xingtie No. 2 Industrial Investment Fund (Limited Partnership).

Following the common practice, the equity pledge ratio for companies on the Shanghai and Shenzhen main boards is approximately 50% to 60% of the stock price, while for the ChiNext board, it is around 30%. At the time of Ai Kang Industry's pledge, the stock price of ST Ai Kang was between 2.2 yuan and 5.5 yuan, with an average price of about 3.8 yuan. Based on this, a rough estimate suggests that Ai Kang Industry may have obtained approximately 230 million yuan from the aforementioned pledges.

According to Choice data, the estimated liquidation line for the aforementioned pledges by Ai Kang Industry ranges from 1.26 yuan to 3.05 yuan. However, the current stock price of ST Ai Kang is only equivalent to 33%-13% of the liquidation line, having already fallen below the liquidation line entirely.

Excessive Use of Listed Company Funds

In addition to frequent cashing out, the controlling shareholders represented by Zou Chenghui have also long-term and extensively occupied the funds of ST Ai Kang. Between 2016 and 2019, the company was repeatedly issued regulatory letters or criticized for non-operational fund transactions with related parties.

A regulatory letter from the Shenzhen Stock Exchange in 2017 mentioned that during the audit of the 2016 annual report, it was noted that the company had paid a cumulative amount of 91,000 yuan on behalf of Ai Kang Industry and several other companies it controlled, such as Suzhou Ai Kang Film New Material Co., Ltd., for social security and housing fund contributions. In November 2021, the Shenzhen Stock Exchange once again criticized ST Ai Kang, stating that the company and its subsidiary, Nantong Ai Kang Metal Technology Co., Ltd. (hereinafter referred to as "Ai Kang Metal"), indirectly provided financial assistance to Ai Kang Industry by prepaying goods to suppliers Jiangyin Donghua Aluminum Material Technology Co., Ltd. and Jiangyin City Zhenlong Photovoltaic Technology Co., Ltd. from 2017 to 2019, constituting non-operational fund occupation by controlling shareholders, with the amounts reaching 160 million yuan, 1.804 billion yuan, and 2.013 billion yuan, respectively.

Apart from non-operational fund occupation, ST Ai Kang has also provided a substantial amount of guarantees for the enterprises of Zou Chenghui's family.

According to the disclosure by ST Ai Kang, as of the end of April this year, the cumulative approved external guarantee limit for ST Ai Kang and its controlling subsidiaries is 9.064 billion yuan, with the actual maximum amount of external guarantee contracts being 6.566 billion yuan, accounting for as high as 323.29% of the most recent audited net assets.

The financial report shows that in 2023, ST Ai Kang had a total of 29 significant external guarantees, many of which were for the "Ai Kang Series" related enterprises of Zou Chenghui's family. For instance, the most frequently guaranteed company is Suzhou Ai Kang Energy Group Co., Ltd., whose general manager is Zou Chenghui. According to Qichacha data, the company is held by Hong Kong-based Huarui International Holdings Limited and was formerly known as Ai Kang International Holdings Limited.ST Aikang has provided guarantees for numerous enterprises within the Zou family, but there are doubts about whether these businesses are genuinely operational. For instance, ST Aikang has actually guaranteed 30 million yuan for Suzhou Aikang Business Technology Co., Ltd. According to data from Qichacha, Suzhou Aikang Business Technology Co., Ltd. is held 99.9% by Suzhou Aikang Enterprise Management Co., Ltd., with the latter's shareholders being Zou Yuwen and Zou Chenghui. Qichacha indicates that the company had only one insured person in 2021, and this number increased to over 20 in 2023.

How to Prevent "Exiting and Forgetting"

Once ST Aikang delists, the most severely affected will be the investors. Wind data shows that as of May 20th, ST Aikang had a total of 276,800 shareholders.

Not long ago, ST Aikang also attempted to conceal the risk of delisting. On April 15th, when responding to an investor's question "Does the company have the risk of being ST?", the company stated, "Currently, there is no risk of the company being ST." However, just 21 days later, the company's stock trading was subjected to other risk warning measures, and the stock abbreviation was also changed to ST Aikang.

Despite being on the brink of delisting, ST Aikang still received a notice of investigation. The company disclosed on June 12th that it and its actual controller, Zou Chenghui, were under investigation by the China Securities Regulatory Commission (CSRC) for suspected violations of information disclosure regulations.

Guo Ruiming, Director of the CSRC's Department of Public Company Supervision, mentioned in response to recent questions from reporters about the implementation of ST and delisting of listed company stocks that after a company delists, the company and related responsible parties should still bear the corresponding civil, administrative, and criminal legal responsibilities for any illegal and irregular activities that may have existed before the delisting. The CSRC places great emphasis on investor protection involving delisting and insists on "pursuing to the end" the illegal and irregular activities of the aforementioned entities.

The CSRC also stated that this year, it has legally transferred 17 delisted companies and responsible parties suspected of crimes to judicial authorities for criminal responsibility, and subsequent judicial authorities will disclose the case details according to the progress of the investigation. Investors who suffer losses due to illegal and irregular activities of listed companies are supported in legally protecting their legitimate rights and interests through litigation and other means.

Industry insiders suggest that in addition to strictly pursuing the legal and compensation responsibilities of listed companies and their shareholders for illegal and irregular activities, it is also possible to draw on foreign experience to establish a more comprehensive investor protection system.

"There is still a significant room for improvement in the protection mechanisms for small and medium investors," said Zhang Yi, CEO of iMedia Consulting, to First Financial Daily reporters. Although there are existing regulations, the process of obtaining compensation for investors is lengthy and complex in practice. It is recommended to further promote convenient dispute resolution mechanisms and also consider actively utilizing the advance compensation system. When issuers cause losses to investors due to fraudulent issuance, false statements, or other significant illegal acts, the controlling shareholders, actual controllers, and related securities companies of the issuer can entrust investor protection agencies to reach an agreement with the investors who have suffered losses on compensation matters and provide advance compensation.

Zhang Yi believes that in addition to focusing on post-event, it is more crucial to focus on pre-event. On one hand, in terms of regulating the behavior of major shareholders and executives, it is necessary to further improve the detailed rules and strengthen the penalties. For example, there are certain regulatory restrictions on the reduction of major shareholders, but in the actual execution process, there are still circumvention behaviors such as indirect reduction, which can easily lead to the interests of small and medium investors being damaged. For such circumvention behaviors, more clarification and constraints can be applied. On the other hand, since China's A-shares are mostly composed of retail investors, technological means can be used to create an intelligent investment advisory model and strengthen the education of small and medium investors. For example, using technological means to help small and medium investors understand market risks and dynamics, and building a monitoring system based on artificial intelligence and big data.Some institutional figures believe that it is relatively difficult for the aforementioned suggestions to be implemented. Shen Meng, a director of Chanson Capital, analyzed to the First Financial Daily reporter that although the compensation mechanism is theoretically a protection for investors, the actual execution effect is limited. The reason is that the listed companies subject to claims either have poor asset quality or their high-quality assets have already been transferred by the actual controllers. Even if there is a claim, it is difficult to have sufficient assets available for execution.

Ping An Securities believes that it is appropriate to draw on the experience of overseas small and medium investors in delisting protection. Taking India as an example, whether it is mandatory delisting or voluntary delisting, listed companies must repurchase shares. The United States adopts a class action system to reduce the impact of delisting on public investors. This system follows the principle of "opt-out, opt-in," which means that as long as one person initiates a lawsuit, the final victory or settlement agreement also covers all shareholders by default. In addition, the United States has a special investor protection law, and financial fraud and fraudulent delisting will compensate small and medium investors.