Eliza Wong
Executive Summary
– *ST Gaohong (高鸿股份) confronts imminent face value delisting with shares trading at ¥0.48, requiring five consecutive 10% gains to avoid exchange termination
– China Securities Regulatory Commission (CSRC 中国证监会) alleges systematic financial fraud from 2015-2023 involving ¥209.76 billion in falsified revenues and ¥9.801 billion in fabricated profits
– Company faces additional delisting risk under Rule 9.5.1 for fraudulent reporting and 2020 private placement constituting fraudulent issuance
– Stock demonstrates extreme volatility with 12% price deviation over three trading sessions, reflecting market panic
– Case represents regulatory tightening under Shenzhen Stock Exchange (深圳证券交易所) enhanced delisting framework implemented in 2023
Precipitous Share Decline Triggers Face Value Delisting Countdown
The technological subsidiary of China Academy of Telecommunications Technology (电信科学技术研究院) finds itself in a race against time as its shares hover dangerously below the critical ¥1.00 threshold. Since September 21, 2025, *ST Gaohong (000851) has publicly acknowledged the face value delisting risk that now threatens its 22-year listing status.
Technical Compliance Breach
According to Shenzhen Stock Exchange (深圳证券交易所) Listing Rules Section 9.2.1, companies trading below ¥1.00 for 20 consecutive trading sessions face automatic termination without entering a delisting adjustment period. With 15 sessions already recorded below this threshold, the company faces mathematical impossibility for recovery even with maximum daily gains.
Market Performance Indicators
The stock’s catastrophic decline reflects eroding investor confidence, closing at ¥0.48 on September 19 after demonstrating abnormal volatility with 12% deviation across three sessions. This face value delisting scenario represents the most direct market enforcement mechanism within China’s capital market regulatory framework.
Systemic Financial Fraud Unveiled
The August 8, 2025, Administrative Penalty Prior Notice (行政处罚事先告知书) reveals one of the most extensive financial fraud cases in recent Shenzhen Stock Exchange history, spanning nearly a decade of systematic misrepresentation.
Revenue Fabrication Scale
CSRC investigation uncovered progressively escalating falsification:
– 2015: ¥694 million fabricated revenues (9.34% of reported)
– 2018: ¥3.259 billion fabricated revenues (35.18% of reported)
– 2020: ¥5.634 billion fabricated revenues (49.38% of reported)
– 2023: ¥394 million fabricated revenues (6.65% of reported)
Profit Manipulation Mechanics
The fraud extended beyond top-line figures to fundamental profitability metrics:
– 2020 peak manipulation: ¥21.9 million falsified profits (64.88% of reported)
– Consistent cost inflation matching fabricated revenues
– Eight-year total: ¥9.801 billion in completely invented profits
Fraudulent Issuance Complicates Recovery
The 2020 private placement now stands implicated in the broader fraud scheme, having utilized falsified 2018-2020 financial data to secure CSRC approval for ¥1.25 billion capital raise.
Regulatory Violation Dimensions
This additional violation triggers Shenzhen Stock Exchange (深圳证券交易所) Listing Rule 9.5.1(1) and 9.5.2(1)(6), concerning major illegal强制退市 (forced delisting) circumstances. The fraudulent issuance designation significantly complicates any potential administrative appeal or hearing process.
Capital Market Implications
The case exemplifies CSRC’s intensified focus on capital market integrity, particularly following 2023 regulatory enhancements targeting financial fraud and secondary market manipulations. This face value delisting process demonstrates regulatory willingness to employ multiple enforcement mechanisms simultaneously.
Corporate Background and Business Operations
Established in 2003 as a high-tech enterprise under China Academy of Telecommunications Technology, *ST Gaohong developed three core business segments before the current crisis.
Historical Business Structure
The company’s operational framework included:
– Digital intelligence applications: IoT and smart city solutions
– Information services: Cloud computing and data analytics
– IT sales: Hardware distribution and system integration
Market Position Erosion
Despite historical positioning within China’s telecommunications ecosystem, the company failed to maintain competitive advantage in increasingly saturated technology sectors, contributing to its fundamental decline preceding the fraud revelations.
Investor Implications and Risk Considerations
With dual delisting threats materializing simultaneously, investors face near-total capital loss scenarios with limited procedural protections.
Delisting Process Mechanics
Unlike performance-based delictions, face value delisting under Section 9.2.1 provides no consolidation period, with immediate trading suspension upon trigger activation. Similarly, major illegal delisting under Section 9.5.1 permits no appeal beyond CSRC’s final ruling.
Portfolio Management Considerations
Institutional investors must reassess:
– High-risk small-cap exposure thresholds
– Corporate governance verification processes
– Regulatory compliance monitoring systems
– Exit strategies for position unwinding
Regulatory Environment Intensification
This case occurs within broader regulatory tightening initiated by CSRC Chairman Wu Qing (吴清), emphasizing zero tolerance for financial fraud and market manipulation.
Enforcement Trend Analysis
2025 has witnessed accelerated enforcement actions featuring:
– Increased financial statement sampling rates
– Enhanced cross-border data verification capabilities
– Stricter delisting implementation without adjustment periods
– Personal accountability for senior management and auditors
Market Quality Implications
The rigorous enforcement of face value delisting mechanisms ultimately strengthens market quality by removing systematically non-compliant entities, though individual investor losses remain painful during transition periods.
Forward-Looking Market Guidance
The simultaneous activation of multiple delisting pathways signals regulatory determination to enforce compliance standards without exception. Investors should anticipate continued volatility in similarly positioned small-cap stocks as market participants recalibrate risk assessments.
Portfolio managers must enhance due diligence processes, particularly regarding financial statement verification and corporate governance evaluation. The era of implicit government support for listed entities has conclusively ended, with market-based mechanisms like face value delisting becoming primary enforcement tools.
Immediate actions for market participants include reviewing all holdings trading near ¥1.00 thresholds, conducting enhanced governance audits on small-cap positions, and establishing clear exit protocols for positions demonstrating regulatory compliance issues. The *ST Gaohong face value delisting case serves as critical reminder that China’s regulatory environment now prioritizes market quality over individual entity preservation.
