Recently, Rongxin Service Group Co., Ltd. (Rongxin Service) revealed that the proposal for the company’s privatization has been approved, and it is expected to delist on March 18. This is not the first enterprise to voluntarily delist.
According to a report from “First Financial” on February 17, in November 2024, Rongxin Service announced that the controlling shareholder intended to privatize the company through an agreement arrangement. The reasons cited were low stock trading liquidity, declining stock prices, and the listing platform losing financing capabilities. They believe privatization would be more conducive to the company’s long-term development. It was disclosed that Rongxin Service’s daily trading volume only accounted for 0.04% to 0.05% of the issued shares, and the low trading volume made it difficult for shareholders to cash out, even affecting stock price stability.
Not only Rongxin Service, but another company, Huafa Property, also announced in late May 2024 that its parent company, Huafa Group, planned to privatize and delist it.
Huafa Property explained the reason for delisting, stating that in recent years, the trading volume of shares has been relatively low, making it difficult for shareholders to sell large quantities of shares without negatively impacting the stock price. Since 2017, due to the relatively low trading volume and the downward trend in stock prices over the past few years, the company could not fully utilize its current listing platform as a source of long-term growth funding. Continuing the listing of shares may not bring any meaningful benefits.
By the end of September 2024, Huafa Property completed its privatization, becoming the first property company to voluntarily delist.
“First Financial” said that both companies mentioned low stock liquidity, inability to finance, and cost reduction as reasons for delisting.
The media quoted industry analysts as saying that this is not a problem faced by individual listed property enterprises. Over the past two years, affected by the downturn in real estate and capital market fluctuations, the performance of many property enterprises has declined, showing weak growth, leading to pressure on stock prices. The liquidity of property stocks has also deteriorated significantly, with nearly 90% of the 65 listed property enterprises having a turnover rate below 1%. With declining stock prices and poor liquidity, property enterprises have limited financing functions in the capital market, and the expenses to maintain listed status are not insignificant. In this context, choosing to privatize and delist can be a wise decision.
Public data shows that Rongxin Service Group Co., Ltd. ranked 19th in the 2022 China Top 100 Property Service Enterprises list, and the company was listed on the Hong Kong Stock Exchange on July 16, 2021.
As of the close on February 17, Rongxin Service closed at HK$0.59 per share, with a total market value of HK$300 million.