Shanghai tech board to delist two companies for inflating financials as China pledges to clean up markets
- Software developer Essence Information Technology and Amethystum Storage Technology, which makes optical storage devices in exchange cross hairs
- The Shanghai exchange has halted trading in both companies’ shares whose market value has almost been wiped out since their 2020 debut
Two companies will be expelled from the Shanghai Stock Exchange’s technology board for financial reporting fraud as China strengthens financial risk management in its domestic markets while prioritising self-reliance in science and technology.
Tianjin-based software developer Essence Information Technology and Guangdong-based Amethystum Storage Technology, which makes optical storage devices, could become the first companies to be delisted from domestic stock exchanges after President’s Xi Jinping called for institutional reforms.
Shares of the two companies trade on Shanghai’s Star Market, the tech-dominant board that was created in 2019 in response to Xi’s call for nurturing China’s home-grown tech giant.
Essence Information had inflated profits by a combined 187 million yuan (US$27.1 million) and revenue by a total of 342 million yuan from 2016 to 2019 to qualify for listing, according to the regulatory documents, while Amethystum Storage had overstated net income by 370 million yuan for three years through 2020 and revenue by more than 700 million yuan to aid its listing. The storage company had also concealed information related to collateral securities for loans of 135 million yuan, the exchange said.
